When taxpayer’s come into my office in Richardson, TX related to IRS tax debt problems, IRS Liens are often the major issue they are working to resolve, and taxpayers want to know how to get rid of an IRS lien.
As mentioned in a previous blog, there are two types of liens –
- General or “Silent Lien” – automatic by statute. No one including the taxpayer is notified.
- A Notice of Federal Tax Lien (NFTL) – publicly filed
The NFTL is what causes pain to the Taxpayer, harming their ability to access credit and transfer assets. The IRS is permitted to file an NFTL on tax debts > $10,000 and typically does. When an IRS lien is filed, in most cases, unless the tax debt is paid off, the lien remains.
Here are a few ways to have a lien discharged or released –
- Pay the tax debt off in full,
- File and complete an Offer-In-Compromise,
- With a direct debit installment plan, if the IRS is owed less than $25,000, and the debt will be repaid within 60 months, after 3 consecutive payments, a taxpayer can request discharge using Form 12277. Consider the option of paying down the debt to $25,000 and setting up a direct debit installment plan if it is an option.
- The lien will self-release after the 10 year collection statute expires (the date is on the NFTL),
- Cash Out Refinance when there is equity in real estate owned to pay down the IRS debt,
- A CDP hearing gives another opportunity to work out a collection resolution, such as an OIC, if you were unable to through the collections unit, and
- If the lien was filed in error, consider filing a CAP hearing.
Remember that the IRS has a right by law to file an NFTL. They understand that it creates pain to the taxpayer, and that in and of itself, is not a reason to have the lien discharged. The lien has been found to positively impact collections, so unless it is in the government’s best interest, they will not remove the lien. Use one of the above options to work with the IRS to remove the lien.