What Is A Federal Tax Lien?
A federal tax lien is a legal claim by the government against your property after you neglect to pay your tax debts. The lien protects the government’s interest in your property, including real estate, financial assets, and personal property.
How Long Does a Federal Tax Lien Last?
An IRS tax lien lasts for ten years or until the statute of limitations expires on your tax debt. There are other steps you can take to get rid of the lien sooner.
Paying Tax Debt in Full
Paying off your tax debt in full is the best way to have your lien released. The IRS will release your tax lien within 30 days of receiving payment for your tax debt.
Discharge of property
A discharge will remove the lien from the specific property.
Subordination
“Subordination” doesn’t remove the lien, but it allows other creditors to move ahead of the IRS, which may make it easier for you to get a loan or mortgage still while having a lien against you.
Withdrawal
A “withdrawal” eliminates the public Notice of Federal Tax Lien and makes sure that the IRS will not have to compete with other creditors for your property. But, you are still responsible for the amount due to the IRS.
A taxpayer can request a lien withdrawal if:
- The taxpayer has satisfied their tax liability, and the tax lien has been released
- The taxpayer has a good history of filing compliance dating back three tax years, and
- The taxpayer is current on their estimated tax payments and federal tax deposits, if applicable.
Or Option 2:
- The taxpayer is in a direct debit installment agreement
- Their outstanding balance is below $25,000
- Their exceptional balance due (below $25,000) is fully paid within 60 months or within the Collection Expiration Statute Date, which is earlier,
- The taxpayer is fully compliant with filing and payments
- The taxpayer made a minimum of three monthly payments via direct debit
- The taxpayer cannot default the existing agreement and has never defaulted before.
When you obtain a release, the IRS will file a “Certificate of Release of Federal Tax Lien” with the same state or local authorities that received the Notice.
When you meet any of the following conditions, the IRS will release your tax lien.
Tax Debt is Paid in Full
Once you pay the IRS all of your tax debt and any interest and penalties, the agency will release the tax lien against you. The IRS will file a Certificate of Release.
Settle Tax Debt With an Offer in Compromise
An offer in compromise (OIC) happens when you settle your tax debt for less than you owe. An OIC gives you two years to pay it off.
The Statute of Limitations Expires
Similar to any debt, IRS debts come with a statute of limitations for collecting the debt. If the statute of limitation expires, the IRS can no longer enforce the tax lien against you. Generally, the tax debt will expire ten years after you filed your return or ten years after the IRS assesses the tax debt. If you file bankruptcy, the IRS will likely extend the statute of limitations on collecting your debt.
You Provide the IRS with a Bond Guaranteeing Payment of Tax Debt
You can also post a bond to guarantee payment. Taxpayers do not leverage surety bonds because it is typically challenging to qualify for one due to the negative impact it will have on your credit. What’s more, in most cases, the bond’s cost would be the same as paying off the tax debt. So, this is an uncommon and unwise path.
Once you meet one of the above requirements, the IRS will release the tax lien against you.
Partial Releases of a Tax Lien
In most cases, the IRS will file a Notice of Federal Tax Lien with the name of more than one taxpayer on it. In these scenarios, the IRS may issue a Certificate of Release with the word “partial” on it if one taxpayer on the NTFL satisfies part or all of their liability while the other does not.
Work with a Licensed Tax Professional to Secure the Best Outcome
We strongly recommend working with a licensed and experienced tax professional if the IRS has a lien against you. A skilled professional will help you navigate the IRS collection process, avoid levies, and help you secure the most favorable outcome for your case so that you can be on your way to financial freedom. Contact us today to find out more!
