How to Release a Tax Lien

December, 30 2024 by Kaylie Jonutz

This blog will discuss tax liens and provide information about a few options available if you receive one. If you need assistance selecting the best choice for you, please contact our world-class Tax Professionals from TaxAudit's Tax Debt Relief team.
 

What is a tax lien?

A tax lien occurs when the IRS makes a legal claim to your property as a way to settle a tax debt. This property can include anything from real estate to personal property, such as cars or jewelry, to financial assets like your bank accounts or investments.
 

Why did I get this tax lien?

You likely received a tax lien because the IRS has issued multiple notices to attempt to collect tax debt, and they haven’t received a response from you.

Keep in mind that, when discussing tax liens, there are two different types:
 

• A Federal Tax Lien is a legal claim against your current and future property. A Federal Tax Lien This type of lien is automatically filed against you if you don’t pay the amount due after receiving your first bill.
• A Notice of Federal Tax Lien is a public notice to creditors filed with your county. It tells creditors that the IRS has a claim to your property. You will receive Letter 3172 notifying you of this, which will still include your total amount owed.

Please note that a lien does not involve physically seizing your property – it just means they have a claim to your property until you can settle your tax debt. For example, if the IRS files a Notice of Federal Tax Lien, they would not be seizing your home – however, you would not be able to sell your home until the lien is settled because the IRS would have claim to it.
 

What are my options?

If you can't pay the total amount or disagree with the amount the IRS states you owe, you can request a Collection Due Process Hearing. After receiving a Notice of Federal Tax Lien, you will be sent a Notice of Your Right to a Collection Due Process Hearing within five business days. You must request the hearing by the date shown on the notice, usually within 30 days after the 5-day period ends. When filling out the Collection Due Process Hearing request (Form 12153), you can propose a collection alternative to the lien, including an installment agreement or an Offer in Compromise, or dispute the balance if you did not have a previous opportunity to do so. Once you complete the form, you will send it to the address shown on your lien notice. If you disagree with the hearing's decision, you can further dispute it with the Tax Court.

If the lien cannot be removed and you want to reduce the impact, there are options to minimize the effect. These options include:
 

• Discharge of property removes the lien from a specific property. To see if you are eligible and to read more, click here to visit the IRS document on this topic.
• Subordination allows you to receive a loan or refinance a mortgage. To see if you are eligible and to read more, click here to visit the IRS document on this topic.
• Withdrawing the Notice of Federal Tax Lien removes IRS competition with other creditors, but you remain liable for the amount due. To see if you are eligible and to read more, click here to visit the IRS page on this topic.

If you want to know your other options, you can refer to IRS Publication 1660, Collection Appeal Rights for more information; however, if you continue to disagree with the IRS, we recommend reaching out to a qualified tax professional to assist you. They will be better equipped to navigate tax issues such as these.

If you agree and are financially able to, you should pay the total amount you owe immediately. You can pay your tax lien by clicking here.

Once the lien is released, you will receive Form 668(Z), a Certificate of Release of Federal Tax Lien. The IRS will release your lien if:
 

• Your debt is fully paid,
• A bond guarantees payment of your debt,
• You have fulfilled the payment terms of an Offer in Compromise accepted by the IRS, or
• The collection period has expired.

Dealing with liens can be complex and frustrating, especially when doing it alone. TaxAudit’s Tax Debt Relief team is available to help! We are ready to offer a   free, no-obligation consultation with one of our knowledgeable tax professionals. In this consultation, our tax professionals will review your unique tax situation and help you determine the best option for handling your lien. For more information, reach out at 800.922.8348 or click here.