How do you get a tax lien removed?

by: Claudine Gindel 2016-05-25

Is it possible to get a tax lien removed? Yes! Is it easy to get a tax lien removed? Unfortunately, no.

A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets. A federal tax lien exists after the IRS:

  • Puts your balance due on the books (assesses your liability);
  • Sends you a bill that explains how much you owe (Notice and Demand for Payment); and
  • You neglect or refuse to fully pay the debt in time

One of the most beneficial IRS Fresh Start Program Tax Lien improvements is the change to thresholds. The threshold for the IRS filing a lien was bumped from $5,000 to $10,000.

When using a DDIA (Direct Debit Installment Agreement) the threshold for requesting a lien withdrawal has been set at $25,000. For the DDIA, there are a very certain number of people who can fit into the category. If you’ve had a defaulted payment or failed to be in compliance, it’s probably not going to help you. Chances are it’s not going to help the majority of taxpayers, but it can provide some relief to those who meet the criteria.

Technically, the IRS can file a lien for any amount if it’s deemed warranted9quot;. The new thresholds do not preclude the IRS from acting on their own prerogative.

You first need to determine if you qualify to request a lien withdrawal. You must:

  • Satisfy your tax liability
  • Be compliant! This is so important whenever dealing with the IRS. If you aren't compliant your tax problem will not go away.
  • Be current

Even if you haven't paid the IRS what you owe, you may still be able to qualify for this program if you meed certain criteria. If you need assistance understanding if you meet those qualifications, contact us for help.

We have seen Federal Tax liens removed in a personal Chapter 7 Bankruptcy, but typically they will not be (and then you have the problem of a Bankruptcy on your credit report). If you qualify and can get into Currently non-collectible status, or a partial-payment installment agreement, the IRS will file a tax lien as a matter of right.

The most common way to request a removal of a tax lien when you don't qualify for the Fresh Start program is to show that the lien is putting your income-earning ability at risk. If you choose to take that route, be meticulous when providing your information to the IRS. When they review your case, they have to believe beyond a shadow of a doubt that you truly cannot function with this lien on your life.

The other possible way to remove a tax lien is to have an Offer in Compromise accepted and paid. About 2 months after an Offer in Compromise is accepted and paid, the Notice of Federal Tax Lien will automatically be released. While a Release is not as favorable as a Withdrawal (A Lien withdrawal erases the existence of a tax lien on your credit report, a release shows there was a debt and it is paid in full), it's better than nothing.

Next, an IRS form needs to be filled out. IRS Form 12277, 'Application for Withdrawal'. This is an area where we've seen the slow moving nature of the IRS kick in. Their approval could take a while. There is no specific time frame that they are required to reply to you, and we've seen cases where the paperwork will sit on a desk while the IRS agent works on more 'pressing9apos; cases. It's worth the time to follow up with the IRS once submitted.

How do I know if my lien withdrawal was approved?

If the IRS approves the request, they file Form 10916(c), 'Withdrawal of Filed Notice of Federal Tax Lien' in the recording office where the original 'Notice of Federal Tax Lien' was filed. They also provide a copy of the documents for your records.


Tax Liens in Chapter 7 Bankrutpcy

The primary reason people file Chapter 7 bankruptcy is to discharge, or eliminate, their debts and get a fresh start with their finances. Tax liens, however, are not discharged simply by filing bankruptcy. Tax liens continue in effect after a Chapter 7 filing until they are paid off or otherwise released.

This article will focus on federal tax liens. Similar principles apply to state tax liens. Laws vary from state to state, however, on specific issues such as how state tax liens are created and what property they cover.

A lien is a security interest, or claim, against specific property. A home mortgage, for example, is a lien against a residence. If you don't pay the debt, the creditor can sell the property that is subject to the lien to get reimbursed.

A federal tax lien is like a mortgage, except that it secures your obligation to the IRS instead of a lender. A tax lien can be imposed if you fail to pay taxes on a timely basis. However, just because you owe taxes does not mean that you are subject to a tax lien.

How state tax liens are imposed. Laws vary between states as to what is required to impose a state tax lien.

How federal tax liens are imposed. The IRS file a notice in order to get a federal tax lien against your property. The notice must be filed in the county where you live or where the property is located. Once the IRS files its notice, it has a lien against all property -- real or personal -- that you own. The lien attaches to all property that you own from and after the date that the IRS files its lien. Federal tax liens continue in effect for up to 10 years after the IRS assesses the taxes that you owe.

What Happens to Tax Liens When You File Chapter 7 Bankruptcy

What happens to tax liens when you file for bankruptcy depends on whether or not the tax lien was in place before you filed for bankruptcy.

Tax Liens Imposed After Your Bankruptcy Filing

Filing Chapter 7 triggers a statutory protection known as the automatic stay. The automatic stay bars creditors, including the IRS, from taking action to collect most types of debt except through the bankruptcy process.

Among other things, the automatic stay bars the IRS from filing a tax lien postbankruptcy. This means that the IRS cannot impose a tax lien during your Chapter 7 case unless it previously filed a notice.

Tax Lien Notices Filed Before Your Bankruptcy Filing

A tax lien filed before your bankruptcy, however, continues in effect. The bankruptcy court cannot set aside a tax lien as long as it was filed properly before your Chapter 7 case.

Paying Off Tax Liens Through Bankruptcy

Tax liens may be paid, in whole or part, through the bankruptcy process. A bankruptcy trustee is appointed after you file Chapter 7 to administer and liquidate assets in your bankruptcy estate to raise money to pay your debts. In some Chapter 7 cases, debtors have assets that the trustee can sell to pay creditors, including the IRS. The IRS is entitled to any money raised through the sale of assets covered by a federal tax lien except to the extent there are prior mortgages or security interests.

Example. Say your house is worth $350,000 and is subject to a $100,000 mortgage and a $75,000 federal tax lien. Let’s assume that you are entitled to a homestead exemption of $100,000. If the bankruptcy trustee sells your home, the trustee would pay $100,000 to your mortgage lender and $75,000 to the IRS. The trustee would also pay you $100,000 for your homestead exemption. The balance of $75,000 would go to pay costs of sale and other creditors in your bankruptcy case.

When Tax Liens Are Not Paid Through Bankruptcy

Unfortunately, tax liens usually are not paid in Chapter 7 cases. Most Chapter 7 cases are “no asset” cases. In a no asset case, creditors receive nothing because there is no property that the trustee can sell for the benefit of the bankruptcy estate after taking into account secured claims (like mortgages and tax liens) and exemptions. Ordinarily, trustees will not attempt to sell property if all of the proceeds would have to be paid to secured creditors or the debtor.

Example. Let’s take the example of a house worth $200,000, with a $150,000 mortgage, a $25,000 federal tax lien, and a $100,000 homestead exemption. In most cases, the trustee would not try to sell the house, because there would be no proceeds available to pay other creditors after taking into account the mortgage, tax lien, and homestead exemption.

In this situation, the tax lien would still remain on your property after your Chapter 7 case is over. In order to get rid of the lien, you could sell the property and pay the IRS from the proceeds. Or, you could attempt to work out a payment plan with the IRS to pay the balance due and have the tax lien released. Simply filing Chapter 7, however, would not make the lien disappear.

Tax Liens on Personal Property

Tax liens also attach to personal property, such as cars and household furniture. In most Chapter 7 cases, trustees do not try to sell personal property, because it is either worth too little, encumbered by liens (like auto loans), or subject to exemptions. You have to continue to deal with tax liens that cover personal property you are able to retain after a Chapter 7 filing.

Dealing With Tax Liens After Bankruptcy

Generally, your options to deal with a federal tax lien that remains in effect after bankruptcy are to:

  • pay the tax lien and obtain a release
  • negotiate a payment plan or compromise to release the tax lien
  • redeem a specific item by paying its value, as determined by the bankruptcy court, to the IRS
  • pay the tax lien over time by filing for Chapter 13 bankruptcy after your Chapter 7 (this is often referred to as a Chapter 20 bankruptcy), or
  • do nothing and gamble that the IRS will not take action to collect on its tax lien.

Taking no action can make sense when the value of property subject to a tax lien is relatively nominal and your personal liability for the tax obligation was discharged through your Chapter 7 filing. (Learn more about when tax debts can be discharged in bankruptcy.)


When Does An IRS Tax Lien Expire

By Robert S. Schriebman, SJD

The IRS has a right to file a Notice of Federal Tax Lien (NFTL) against any taxpayer, business or individual, who owes the IRS more than $10,000. Under Internal Revenue Code Section 6502, the IRS has 10 years to collect that tax deficiency. Before the end of the 10-year period set forth in the statute the IRS can take the taxpayer to federal court and obtain a judgment for the unpaid taxes. At that time California law comes into play and the IRS can record the judgment effectively as a new tax lien for successive 10-year periods. However, it is rare for the IRS to go the judgment route. So I will spend the rest of this paper discussing the normal expiration of a standard NFTL - the basic 10-year period.

Logic would tell you that if the IRS has 10 years to collect what is owed to them the lien should expire and be gone at the end of that 10-year period. Unfortunately logic does not always rule the day. Tax liens an be extended either voluntarily or by operation of law, and these extensions can take you by surprise. There are several ways liens can be extended beyond 10 years:

1. The most understandable way a lien can be extended is voluntarily by the taxpayer expressly agreeing to an extension by signing IRS Form 900. Recently a case came out where the court held that a 29-year extension was considered reasonable and valid. Frankly, I found this case to be shocking!

2. Submitting and negotiating an Offer in Compromise (OIC) also extends the statute of limitations for collection. There is a lot of advertising on television these days from companies offering to solve all your tax problems with an IRS OIC. What these companies fail to tell you is that very few OICs get accepted by the IRS. They also fail to tell you that virtually every OIC submitted to the IRS, even if it is not accepted, extends the statute of limitations for collection. Taxpayers who submit several OICs during the time they owe taxes can add years to the IRS's ability to collect the tax and to the life of the tax lien.

3. Bankruptcy filings such as Chapter 7 also give the IRS much more time to collect the tax and extend the life of the tax lien. The usual rule of thumb is that the tax lien is extended by the time of the bankruptcy proceeding plus 6 months.

4. When you owe the IRS you will receive a series of collection notices, each one stronger than the preceding notice. The final notice and demand is sent by certified mail and informs you that the IRS is going to take immediate collection action or file a lien against you - but you have a right to hearing. This hearing is known as a Collection Due Process (CDP) hearing. Hearing application forms are usually supplied with this notice. If you fill out the forms and timely send them to the IRS, you will be entitled to a CDP hearing. While this process is pending the IRS is prohibited from taking enforced collection action against you. It is not uncommon for the hearing process to drag on for up to 2 years. While this appears to be a great way of getting the IRS off your back for awhile, there is a price to pay for this breather. A CDP proceeding tolls or stops the running of the collection statute and extends the life of the tax lien for the entire period in which the CDP matter is pending plus 90 days.

As you can see, there are subtle ways that the life of a tax lien can be extended way beyond its statutory life of 10 years. The best was to find out when a tax lien expires is to contact the IRS and ask them to provide you with an account transcript for the year or years involved. From the transcript it will be possible to accurately calculate the expiration date of your tax lien.

In another article I will discuss how to get the tax lien off your credit report.

© Copyright 2011. No part of this article may be taken and used in any way whatsoever

without the express written consent of Robert S. Schriebman

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, IRS Tax Collection Procedures - A Manual for Practitioners published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See California Tax Collection Practice and Procedures and California Taxation Practice and Procedure, both published by Commerce Clearing House.


Thread: (Legal) The word 'underlying' in US tax lien context.

What does it mean when a tax lien is released

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(Legal) The word 'underlying' in US tax lien context.

The examples are:

If the underlying tax liability has not been satisfied or is not legally unenforceable, the taxpayer is not entitled to release of the lien. See Beeler v. Commissioner, T.C. Memo. 200-266; United States v. DeTar, 2009 WL 2252822 (W.D. Mich).

The effect of a release is extinguishment of both the notice and the underlying assessment lien. IRC § 6325(f). The release itself does not extinguish the underlying liability.

A discharge of the property means that the federal tax lien is removed from a particular piece of property. This occurs only in limited situations listed in IRC § 6325(b). A discharge of the property must not be confused with a release of the federal tax lien. When the Service releases the federal tax lien, the underlying tax lien is extinguished on all of the taxpayer’s property.


Government Tax Lien Network Reviews

What does it mean when a tax lien is released

Government Tax Lien Network claims to help you achieve financial independence and earn huge returns by showing you how to invest in real estate tax liens.

  • Category:
  • Finance
  • Review Topic:
  • Investing,
  • Real Estate
  • Website:
  • www.gtlndvd.com

About Government Tax Lien Network

Government Tax Lien Network claims to help you earn a government-guaranteed 16% 50% return on your money, and to teach you how to buy real estate for pennies on the dollar, by investing in tax liens.

According to Government Tax Lien Network, their team of experts can help you achieve financial independence and security by teaching you the same techniques used by “sophisticated investors, banks, and high net worth individuals for over 150 years.” This includes showing you how to find good deals, what properties to buy, and where.

Government Tax Lien Network claims that their members also have access to the most comprehensive and up-to-date list of tax liens, properties, and insider information. In fact, GTLN guarantees that you’ll have the opportunity to buy a property within 7 days of signing up.

But when it comes down to it, are Government Tax Lien Network’s claims based in reality, or are they simply too good to be true? Consider the following:

A tax lien “is a lien imposed by law upon a property to secure the payment of taxes. A tax lien may be imposed for delinquent taxes owed on real property or personal property, or as a result of failure to pay income taxes or other taxes.”

Here’s a brief example of how a tax lien works: Let’s say you are delinquent on your $10K county taxes for one reason or another, which are funds that the municipality requires in order to fund infrastructure (road, highways, sewage, etc.), schools, fire and police employees, and many other types of public services.

Eventually, the county will sell your $10K delinquency to an investor in order to recoup their money, who, according to the Tax Lien Network’s promotional video, will earn a guaranteed return on their investment of anywhere between 16% and 50%, depending on the state in which you live.

Then, if you eventually pay your $10K in taxes, the county will write a check to the investor for the original investment amount, plus the interest that’s been paid as a penalty by you. On the other hand, if you never pay your taxes, then the house becomes the investor’s, free and clear.

Sounds like a no-brainer, right? But are tax liens really a solid investment option? Let’s find out.

Are Tax Liens Good Investments?

Potential Benefits of Tax Liens

As stated in the Government Tax Lien Network’s promotional video, the interest rates for tax liens can go as high as 50%, depending on the state in which you live (although Investopedia claims interest rates only go as high as 36%). As such, you stand to make a decent chunk of change while holding the lien (we’ll talk more about this in the next section).

In addition, if the property owner is unable to repay the lien, the investor has the ability to foreclose on the home, which means that they have the potential to gain real estate at pennies on the dollar.

Potential Pitfalls of Tax Liens

First, according to a 2012 article in Forbes, “Twenty-eight states, Washington, D.C., Puerto Rico and the U.S. Virgin Islands allow those liens to be sold to private investors.” In other words, not all 50 states offer tax liens as alluded to in the Government Tax Lien Network’s promotional video. As such, if you don’t reside in one of these states, it will be much more difficult to invest in tax liens.

Next, despite GTLN’s “guaranteed9rdquo; interest rates of 16% to 50%, the article states that “After all expenses are figured in, individual investors typically earn 4% to 7% a year, and 99% of sold liens are redeemed by the property owners, says National Tax Lien Association Executive Director Brad Westover.” This means that, not only are the returns much lower, but if you’re expecting to get a “free9rdquo; property out of the deal, it appears that this rarely occurs.

In fact, even in instances where the homeowner is unable to pay back taxes, they may be able to have them waived by filing for bankruptcy. If this occurs, you as the investor will basically be holding a worthless lien, and will have lost your investment capital.

Also, keep in mind that you’ll have to bid on liens you’re interested in purchasing. And often times, investors (who are often made up of big investors) will bid more than the amount of the lien itself, which can cut deeply into your overall return on investment. You’ll also need a decent amount of capital to begin, and it could be years before you see this money again (assuming you make money on the investment at all).

Are There Other Tax Lien Companies Out There?

Next, keep in mind that there are dozens upon dozens of tax lien companies similar (or nearly identical) to Government Tax Lien Network, so it’s important that you research all your available options before making a decision.

And because the Government Tax Lien Network website doesn’t provide detailed information about the information their team provides to its investors, or how this is different than the competition, there’s no way to discern how well they stack up.

Finally, although Government Tax Lien Network claims to guarantee that you’ll have the chance to buy a property within 7 days, this doesn’t mean that the property will necessarily provide a solid return on investment, or even that you won’t be outbid by another investor.

In other words, in the instance of tax liens, “opportunity9rdquo; does not necessarily translate into “wise investment.”

Are Investors Making Money with Government Tax Lien Network?

Overall, the only online review available for the Government Tax Lien Network at the time of our research was on BiggerPockets, where several members claimed that you can get much of the same information for free by searching online, reading books, and even speaking directly with clerks at the county assessor’s office. They also noted that many of these types of companies tend to downplay the risks associated with tax liens and overplay the potential benefits, and that it’s a high-stakes transaction not suitable for inexperienced investors.

Unfortunately, neither Government Tax Lien Network or its subsidiary, Real Estate Workshops, are listed with the Better Business Bureau.

Can the Government Tax Lien Network Help You Make Money?

Chopping to the Point: Considering that investing in tax liens comes with a huge amount of risk, you’ll need to learn as much about the process as possible before handing over your money, especially if you’re new to the industry.

Once you’re sufficiently knowledgeable though, Government Tax Lien Network provides some information about how their system works or what sets them apart from the competition.

Because of this, you’ll definitely want to research all your tax lien options before making a final decision.