A tax lien is damaging to the financial stability of a taxpayer and restricts his or her ability to take on new credit. If a tax debt is left unresolved after a lien is established, the IRS can ultimately seize the taxpayer’s property. Therefore, a taxpayer should make immediate efforts to get a lien released and avoid a levy. Here are some of the methods to get rid of a lien:
The fastest way to get rid of a lien is to pay the full tax debt owed in a single payment. The IRS releases the lien 30 days after the balance is satisfied. A “discharge” means that the lien is removed from a property. After a discharge, a taxpayer is again free to sell, rent or refinance the property.
In “subordination”, the lien is not removed, but the IRS allows other creditors to deal with the property. Subordination is allowed only if the IRS believes that it will make it easier for the taxpayer to get a loan or mortgage to pay the tax debt.
A “withdrawal” does not remove the lien itself, but only the Notice of Federal Tax Lien. In other words, this is a declaration that the IRS is not competing with other creditors on the taxpayer’s property.
Whichever method of resolution you choose, the IRS will consider its own interests first and will only reach a compromise if they see that it benefits them.
Withdrawal of the Notice of Federal Tax Lien
If you pay your full tax debt after the lien’s release, then you may get the Notice of Federal Tax Lien withdrawn if:
- Your tax debt has been paid and the lien released
- You have filed past three years’ tax returns, business returns, and/or information return
- You are current with all your tax payments.
You can also get the Notice of Federal Tax Lien withdrawn if you convert your regular Installment Agreement to a Direct Debit Installment Agreement. For that, you are required to meet various eligibility criteria.