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Form 12277 CPA discusses the Federal Lien Withdrawal Process | Forms 668(Y)(c) and 668(Z)

Form 12277 CPA, federal tax lien Form 668

Gary Bode, CPA: it’s best to call a federal tax lien CPA before the lien when you still have some options. (910) 399-2705.

IRS Form 12277 CPAs hear a lot of confusion about the federal lien withdrawal process. Here’s the three forms usually involved:

  • Form 12277 (Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien.
  • Form 668(Y)(c), Notice of Federal Tax Lien.
  • Form 668(Z) , Certificate of Release for federal tax lien.

How does the IRS name these things?

There’s generally lots of IRS communication before they place a lien. So, Form 668(Y)(c) usually doesn’t surprise folks. I prefer to prevent a lien, but certainly know that’s not always possible. Sometimes a CPA can get them to delay it. Once the IRS places a lien, they Perfect it, which means they get top dog status as a creditor. Perfection takes place in the local Register of Deeds office. Once the federal lien is in place, it appears on your credit report. Nothing is worse on a credit report then a federal tax lien. Period.

“Hang on to Form 668(Y)(c) and Form 668(Z); you’ll need them to file Form 12277.” 
– Gary Bode, Form 12277 CPA

Next, folks wrestle with how to pay the lien. Often that’s with Form 9465, an Installment Agreement. If so, let them automatically debit your bank account for the payments. Why? A good track record of debit payments for Form 668(Y)(c) helps when you file Form 12277. How long is long? It depends. Each case is different.

Federal Lien Release vs. Withdrawal

Releasing the lien occurs when you’re fully paid off. They’ll send you a Form 668(Z). But it still appears on your credit report for seven years. Ouch! You’d think the withdrawal of the lien would be automatic, but it’s not. However, in the last few years, withdrawal is almost a given, if you’ve paid up, once you file Form 12277. So a Form 12277 CPA isn’t always required. But some clients prefer us to do it and the cost is modest. Remember the IRS has its own rhythms: folks get impatient waiting for them. The only thing to do is keep calling.

Filing Form 12277 before you’ve paid off the Lien

This isn’t a given. Here a Form 12277 CPA is useful because we know a bit more about what conditions the IRS will accept to withdraw the lien. And of course, there’s really no incentive for them to do so. Sometimes it works, sometimes it doesn’t. If you do use a Form 12277 CPA, make sure he/she signs off on it. A CPA is the signature box probably helps.

I’m a Form 12277 CPA with a virtual office to serve you wherever you live. If possible, call us before the lien is Perfected. We offer a free phone consult at (910) 399-2705.


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