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Removing a Federal Tax Lien

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You’ve owed the IRS back taxes for some time and now a lien has been placed against your assets and property.

What does this mean?

If you’ve been hit with a federal tax lien, it’s important to know what you’re dealing with, so you can make the necessary preparations. Here at Milikowsky Tax Law, we’ve broken down how liens work, how you can get them removed, and what happens once they’ve been released.

How a Lien Works

The IRS will assess your tax liability and send you a bill explaining how much you owe and the deadline for the payment. A lien is the federal government’s claim against your assets and property, in the event that you fail to pay this tax debt. It protects the government’s interest in all of your property, including personal property, real estate, and financial assets.

Once a lien has been placed, the federal government will alert creditors to the fact that it has the legal right to your property with a Notice of Federal Tax Lien. Liens are also public record, so they will show up in your credit report.

A lien is different to a levy, although the two are often confused. Levies remove the property to pay the tax debt, which means a levy could be money taken directly out of your paycheck to pay to the IRS. A lien, on the other hand, only secures the government’s interest in your property when a tax debt goes unpaid.

The best way to avoid a lien is to pay your tax bill on time. But what happens when you find yourself the recipient of a federal tax lien?

How to Remove a Lien

The easiest way to get rid of a lien is to pay it off as soon as you can.

If you cannot pay the money you owe within the specified timeframe, you have a few options to reduce the burden of the lien:

  • Subordination: Subordination does not remove your lien, but instead allows other creditors to collect money before the IRS. This might help if you want to apply for a loan or a mortgage.
  • Discharge of Property: In some cases, your lien can be removed from specific property — however, The Internal Revenue Code has strict provisions for eligibility.
  • Withdrawal: You can apply to have the lien withdrawn if it was filed in error. Of course, this will only remove the lien and not the amount you owe to the IRS.

No matter whether you believe your lien has been issued by mistake or you would like to explore your options for having your lien released, you should always speak to a skilled tax attorney for assistance.

After a Lien is Released

Your lien will be officially released 30 days after your debt has been paid. A lien may also be removed earlier if it truly was filed by mistake, or if the IRS feels that it will help hasten the collections process. In any case, once your lien is released, your property will no longer be encumbered by the IRS.

At this point, your local county will be notified and your records will be updated to indicate that your lien no longer exists. The IRS will send you a copy of the lien release and you should forward this to your credit agencies immediately, so they can update your credit report.

Unfortunately, this does not mean that you’re out of the woods; a record of the lien will remain on your credit report from seven to ten years, unless it was filed by accident and you have the documentation from the IRS to prove it. This is why it’s crucial to seek support from tax experts who can help lessen the financial blow after a tax lien.

Contact Milikowsky Tax Law today, and our experienced tax specialists will walk you through all of your tax lien options during your free consultation.