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There are a handful of completely legal, viable options for removing a tax lien, and we’re here to help.

Option 1- Appeal the Lien

The IRS will remove a Notice of Federal Tax Lien if you prove that the IRS was in the wrong. A tax lien can be lifted through tax resolution appeals process if:

  • The tax debt is paid in full.
  • The lien was falsely filed.
  • The IRS did not follow accurate processes.
  • The 10 year statute of limitations on collecting the tax debt has expired.
  • The IRS did not give you an opportunity to challenge the amount assessed.
  • The lien was falsely filed and the IRS made an error when processing your return.
  • You were in the process of bankruptcy at the time the lien was filed.
  • You want to consider your collection options, like the Fresh Start Initiative.
  • You want to make spousal defenses by justifying that the lien is purely your spouse’s liability.

When you receive the lien notice, you can file for a Collection Due Process hearing with the Office of Appeals. To be considered eligible, you must file your request within 30 days after fifth day of the lien being filed or by the date stated on the lien notification. If this sounds overwhelming, we can provide representation and file an appeal with the IRS, or request the lien to be withdrawn, for you.

Option 2- Have the Lien Withdrawn

The notion of having a lien “withdrawn” gives hope to many distressed taxpayers. When a tax lien is withdrawn, it completely removes the lien as if it was never there. This is possible when taxpayer’s lien is paid off, or is proven to be wrongly filed. Withdrawal is also an option if you qualify for the Fresh Start Initiative, have entered a direct debit agreement, and your tax debt balance is $25,000 or less. It’s important to note that tax liens held at the state level do not have completely comparable lien withdrawal guidelines and will still show on your credit report.

Like state tax liens, tax settlements are also not susceptible to lien withdrawal. A settlement, also known as an Offer in Compromise, happens when a taxpayer and the IRS agree to terms of where they taxpayer pays less than the total tax debt but is considered adequate payment. Since this not exact repayment in full, the IRS grants what they call a “release” instead of a withdrawal.

Option 3- Have the Lien Released

Similar to a lien withdrawal, if you qualify for the Fresh Start Initiative and your balance is less than $25,000, you can apply for the lien to be released. If you do not request a lien release, then your lien will be released 30 days after your debt has been paid in full or you’ve arranged a streamlined installment agreement.

When a lien has been released it is no longer attached to your property and assets, and public records will reflect the change. You should send a copy of the lien release to credit reporting bureaus to update your credit report, however the lien will continue to show on your credit report for up to ten years after the debt has been paid. This is why lien withdrawal is a more appealing option to taxpayers.

Option 4- Lien Subordination

One more option for taking care of a tax lien is through lien subordination. This method approves another creditor to subordinate the IRS’ interest in a property and move ahead of the line. An example of this would be during a home refinance process, where the home has a lien placed on it. In this situation, the IRS will allow a lender to disregard the lien and move forward with the refinance, if the IRS receives a portion of proceeds.

Lien subordination is often complex, and it’s not always the most favorable option to the taxpayer. The IRS will only allow lien subordination if it results in a larger or quicker payment. Since this is such a complicated process, we always suggest partnering with a tax resolution professional for lien subordination.

My Lien Has Been Removed. Now What?

After the IRS has removed your tax lien and you have received your official Notification of Withdrawal or Release, you will need to contact the three credit agencies to ensure your reports are up to date. Follow the steps below to make sure that your records are updated as soon as possible, as to not completely shatter your credit score.

Steps to Remove a Lien from your Credit Reports

  1. Get a copy of your credit report (AnnualCreditReport.com) and check the status of the lien. Credit bureaus will usually update the lien on your report without you having to take action.
  2. If your lien status has not been updated, you will need to contact each agency to contest the lien.
  3. Then, the agencies will contact your county courthouse to verify that your information is correct. Each agency will let you know how each dispute turned out, and whether or not the lien was removed.

You should note that Experian in particular will send information regarding exactly what documents you should send to verify that the lien has been released. By doing this, they should be able to update the lien status.

How to Avoid a Tax Lien

The best way to avoid a tax lien is by paying your taxes in full and on time.  You should always file your taxes before the IRS has the time or reason to send an agent out to your local courthouse to file a tax lien against you. Although liens can sometimes be removed, the damage done to your credit report can be critical, so it’s best to avoid having one filed in the first place.

We understand that paying your taxes in full and on time is not always possible, so we’ve put together a list of other ways to prevent a tax lien.

  • Carefully read and respond quickly to any notices or letters from the IRS
  • Keep track of your tax status, and organize your tax records in a safe, secure place
  • Contact the IRS immediately if you believe a tax lien was falsely filed against you
  • File an extension and pay any amount possible if you cannot pay your full tax debt by the tax deadline
  • Set up an installment agreement with the IRS if you cannot pay your complete tax debt by the deadline
  • When an installment agreement is in place, the IRS will not file a lien against you. However if you fail to make a scheduled payment, the IRS will establish you as undependable, and you will have a lien filed against you immediately.
  • Contact a tax resolution professional if you are anxious or hesitant of working directly with the IRS
  • A tax resolution professional will listen to your tax concerns, explain your options and next steps, and help you negotiate a deal or remove any potential liens with the IRS.

If you have a tax lien filed against you, Five Stone Tax Advisers can help. Whether you owe money to the IRS, have received a Notice of Federal Tax Lien, or believe that a lien was falsely filed against you, we’ve got you covered. Our tax attorneys are committed to resolving your tax issues while getting you the best possible outcome.

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