Withdrawal of Tax Liens
A Notice of Federal Tax Lien can be withdrawn by the IRS. If the IRS does this, it’s as if the Notice was never filed. In 2011, the IRS expanded the situations in which a taxpayer can get a tax lien withdrawn.
The credit reporting industry began removing tax liens from credit reports in 2011 if the IRS had withdrawn it. You must meet certain conditions for the lien to be withdrawn, but this allows you to have a federal tax lien removed from your credit report in less than the usual seven years.
Qualifying for an IRS Tax Lien Withdrawal
You must meet one of these two criteria to have the IRS remove a tax lien that has been placed against your assets:
1. Your Tax Lien Has Been Paid in Full
- you paid the lien in full
- you have complied with all tax filings within the last three years, and
- you are current on estimated tax payments and federal tax deposits (if applicable).
The IRS to may “release” the lien if you have entered into an agreement to pay part of the lien but until the lien is paid in full the lien will not be fully withdrawn.
2. You Have Agreed to Direct Debit Installment Plan With the IRS
The IRS may withdraw a tax lien prior to it being paid completely. This is done by entering into an agreement to repay the entire lien through direct debits. You may qualify for the withdrawal of the lien after three payments. The following conditions must be met:
- your debt is $25,000 or less
- you enter into a Direct Debit Installment Agreement in which you pay the tax lien in full within 60 months or before the statute of limitations expires, whichever is earlier
- you are in compliance with all other IRS filing and payment requirements
- you have made three consecutive direct debit payments
- you haven’t defaulted on any previous Direct Debit Installment Agreements.
Learn more about the Fresh Start program here: IRS 2011 announcement about the Fresh Start program.
Requesting a Tax Lien Withdrawal From the IRS
If you meet the criteria for a lien withdrawal, you must request it from the IRS by completing and sending this form IRS Form 12277, Application for Withdrawal of Notice of Federal Tax Lien. The IRS will send you a copy of Form 109169(c) (Withdrawal of Filed Notice of Federal Tax Lien) should it grant you the withdrawal.
Removing a Tax Lien From Your Credit Report
Credit reporting agencies periodically search public records to accurately update the information on your credit report. Your tax lien will be part of that report. To have it removed once settled with the IRS, you need to act proactively and alert the credit reporting agencies of the lien withdrawal so it will be noted correctly on your report.
If the agencies don’t update your report in a timely manner, send a copy of the IRS Form 109169(c) (Withdrawal of Filed Notice of Federal Tax Lien) and open a dispute regarding the information.
What happens if the IRS doesn’t agree to withdraw your Lien Notice?
If the IRS turns down your withdrawal request, you may appeal. Publication 1660 explains your appeal rights. Your first step is to contact the manager noted in the rejection letter you will receive from the IRS.
How to get specific advice about Lien Notice withdrawals?
The IRS has experts known as advisors and work in the collection division of the agency. IRS Publication 4235 has contact information for these experts. You may also download the collection advisory group addresses publication at IRS.gov or call 1-800-TAX-FORM to have one mailed to you. For more general information, visit the website, IRS.gov, and type “lien,” in the search box.
Contact the offices of Hutto & Associates now to solve your tax lien problem.