A federal tax lien can damage your credit and you will want to get it removed as quickly as possible. There are a few perfectly legitimate ways to remove a tax lien if you know where to start:
PAY YOUR TAX DEBT IN FULL:
This is the simplest way to remove a tax lien. The IRS will remove the lien within 30 days of receiving full payment.
TAX LIEN WITHDRAWAL:
You can get the IRS to remove Notice of Federal Tax Lien if you can show that the IRS was in the wrong. A lien can be removed with tax resolution on an appeal. This action can remove a tax lien as if it were never there.
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The tax debt has already been paid in full.
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The lien was filed in error.
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The lien was filed in error and the IRS made a processing error with your return.
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The IRS did not follow proper procedures.
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You were going through bankruptcy when the lien was filed.
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You weren’t given a chance to dispute the amount assessed by the IRS.
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You wish to make spousal defenses by claiming that your spouse should be liable for the lien.
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You want to discuss collection options, like through the Fresh Start Initiative.
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The statute of limitations of 10 years on collecting the tax debt has passed.
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You must make a formal request to have your record of lien erased - it will not disappear on its own.
DISCHARGE OF PROPERTY:
This action can remove a lien off of a specific property under certain circumstances, generally ones that involve the taxpayer’s plan to sell their property to satisfy their tax debt. The IRS will remove a lien on a property so that it can be transferred to a new owner free of having a lien.
SUBORDINATION:
This action doesn’t fully remove your tax lien but allows other creditors to be paid before the IRS. This is useful for those who need to use a property that is under tax lien to refinance or use as a collateral for a loan that will go toward paying tax debt.
NEXT STEPS AFTER A LIEN REMOVAL:
It’s crucial after a tax lien removal to contact the three Credit Reporting Agencies and ensure they have updated your status. Here are some steps:
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Once you have received a Notification of Withdrawal or Release from the IRS, get a copy of your credit report (AnnualCreditReport.com) to find the status of the lien. Often, the bureaus will automatically update the lien on your report with no work on your part.
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If it has not been updated, contact each agency to dispute the lien.
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The agencies will then contact your local courthouse to establish that your information is accurate. Then each agency will alert you on how each dispute turned out, and if the lien was removed or not.
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Experian, in particular, will send instructions with what you should send to verify that the lien was released. With those documents, they should be able to update the status of the lien.
You can avoid a federal tax lien altogether by filing and paying all your taxes in full and on time. Sounds easy? But circumstances may keep you from doing that!
If you can’t file or pay on time, don’t ignore the letters or correspondence you get from the IRS.
If you can’t pay the full amount you owe, payment options are available to help you settle your tax debt over time.
If you’re having difficulty paying your taxes and determining your next steps, contact the Tax Man to discuss your options!