First and foremost, do not ignore notices from the IRS. Even if you can’t pay the taxes you owe, responding to a notice before the due date will prevent a lot of trouble. Be sure to keep your address up to date with the IRS so you receive all notices and letters.
- If you can’t pay the full amount you owe, you have payment options to help you settle your debt over time.
- If you disagree with the IRS that you owe the debt, you may be able to raise your arguments in a CDP hearing or request an audit reconsideration.
- You can hire an attorney, certified public accountant (CPA), or enrolled agent to help you if you wish. But before you do, visit our Choosing a Tax Professional page first.
Releasing a Lien
The lien will be released once you pay the debt - either in a lump sum or over time. However, if a lien is released, it remains on your credit report for a number of years. A lien withdrawal, discussed below, however, removes the lien from your credit report.
Withdrawing a Lien
If the Notice of Federal Tax Lien included on your credit report is causing you a problem, you can apply to have the notice withdrawn if you meet any of the criteria listed below. This means it’ll be removed from your credit report, as if the lien had never occurred.
The IRS may withdraw a Notice of Federal Tax Lien, if:
- You’ve entered into a payment agreement to satisfy the tax liability, unless the agreement provides otherwise.
- For certain types of taxes, the IRS will routinely withdraw a Notice of Federal Tax Lien, if you enter into a direct debit installment agreement and meet certain other conditions. You can get more information about these conditions from the IRS representative with whom you set up the agreement.
- By withdrawing the lien, it will help you pay your taxes more quickly.
- The IRS didn’t follow proper procedures.
- The lien was filed during a bankruptcy automatic stay period, when the IRS generally stops most collection activity, or
- It’s in your best interest, as determined by the Taxpayer Advocate and in the best interest of the government. For example, this could include when your debt is satisfied and you request a withdrawal.
- If you have paid off your tax debt or fully paid your accepted Offer in Compromise and, if applicable, the outstanding amount of any related collateral agreement, and the lien was released, you can ask the IRS in writing to withdraw the lien. The IRS will generally do that, so long as
- You have filed all required returns – individual, business, and information – for the past three years, and
- You’re current on your estimated tax payments and federal tax deposits, as applicable.
You can apply to have the lien withdrawn by using IRS Form 12277, Application for Withdrawal of Notice of Filed Form 668(Y), Notice of Federal Tax Lien (Internal Revenue Code Section 6323(i).
Other situations with liens that might apply to you
- A “discharge” removes the lien from specific property. For example, if you want to sell a certain piece of property that’s under a lien and intend to use part or all of the proceeds to pay your tax debt, you can apply for a Certificate of Discharge.
- See IRS Publication 783, Instructions on How to Apply for a Certificate of Discharge From Federal Tax Lien.
- A “subordination” does not remove the lien, but allows other creditors to move ahead of the IRS, which may make it easier to obtain a loan or refinance a mortgage.
- See IRS Publication 784, Instructions on How to Apply for a Certificate of Subordination of Federal Tax Lien.
Note: The IRS has several videos that relate to each topic that may be helpful to view in addition to the information shared here.