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Tax Lien CPA explains IRS Form 668(Y), Form 10916(c) and IRS Form 12277 | IRS Tax Lien Release | IRS Tax Lien Withdrawal

Tax lien CPA discusses federal tax lien withdrawal through IRS Form 12277 and Form 10916(c)

Gary Bode, CPA: if you need help avoiding a federal tax lien, consider calling us for a free consult at (910) 399-2705.

IRS Form 668, IRS Form 12277 and  IRS Form 10916(c) set up a federal tax lien, request a federal tax lien withdrawal. and finally, actual withdrawal of the federal tax lien.

Hi, I’m Gary Bode, a tax lien CPA. Federal tax liens don’t automatically disappear from your credit report, despite you fully satisfying the IRS in some way (please read below). The IRS only releases your tax lien once you satisfy them. But the tax lien remains on your credit report for seven years, ouch. You need the IRS to withdraw the tax lien by issuing Form 10916(c). You request Form 10916(c) with Form 12277. Generally there are multiple federal tax liens and you need to prepare a Form 12277 for each one. Here’s our past post on Form 668(Y).

Form 10916(c)

You won’t find Form 10916(c) on the IRS website. This is an internal form issued after approving your Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien.

Steps in the IRS Tax Lien and Tax Lien Withdrawal Process – Form 12277

  • The IRS sends you multiple tax notices, each one more aggressive e.g. Notice CP504. If you can possibly avoid a tax lien I suggest doing so. Ask your tax lien CPA for help.
  • You or your business receives IRS Form 668(Y), Notice of Federal Tax Lien. Form 668(Y) establishes the lien on certain assets, up to the amount of tax, penalty and interest due.
  • You satisfy the tax lien or disprove the back taxes. See below for ways to accomplish this.
  • They release the federal tax lien once satisfied.
  • Then you can request withdrawal of the tax lien through File Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien.
  • The IRS issues Form 10916(c). They will send a copy of Form 10916(c) to the three credit agencies. The credit agencies must remove the tax lien(s) from your credit report.
  • Follow up to make sure the tax lien vanishes from your credit report.

Reasons for the IRS to withdraw the tax lien established by Form 668(Y) – sometimes even if it’s not paid off yet

  • An approved Offer in Compromise. The IRS streamlined this “pennies in the dollar” procedure and expanded their criteria to accept more of them. Our earlier posts include: Form 656, Offer in Compromise and the related Form 433-B business collection statement. I think most CPAs investigate ways for their clients to pay less than what the IRS initially demands.
  • Paying off the IRS demand in full.
  • If your tax lien stems from back non-filed tax returns, preparing and submitting these un-filed tax returns inevitably reduces the IRS demand. Here’s our post on back taxes explaining this important process.
  • Sometimes CPA accountants amend earlier tax returns if we can reduce your actual tax liability.
  • Proving the IRS violated their own internal controls on issuing Form 668(Y). Their agents have explicit guidance for Form 668(Y). But of course, tax lien CPAs read these guidelines too and check to make sure the IRS  followed their own rules. This is a long shot, but it pays to mind the details.
  • Completing an IRS Installment Agreement (Form 9465). The IRS relaxed their requirements for an Installment Agreement, especially for businesses during the Recession. Once the IRS sees compliance with Form 9465, they may withdraw a tax lien, if requested to do so. Here’s our post on Form 9465, Installment Agreement.
  • A tax lien destroys credit. Bad credit can limit employment possibilities. Will an IRS tax lien withdrawal actually increase the chance of collection?
  • Has the statute of limitations passed?
  • Perhaps one spouse can avoid a federal tax lien in their name by claiming Innocent Spouse relief. You should talk to a CPA accountant about this option.

Remember your State Taxes too

I’ve seen clients handle their federal tax lien and then come to us because they forgot about their State’s taxes.

Credit Agencies

You can request the IRS to send the federal tax lien withdrawal to the three credit agencies. But it still takes some cajoling to get the tax lien off your credit report.

Can you Handle Form 12277 and Form 10916(c) Yourself?

Yes. Tax lien CPAs are the most valuable when preventing a federal tax lien. But we have clients who prefer us handle the lien withdrawal. Our fee is about $325. Maybe a CPA signing off on Form 12277 helps. Our free phone consult doesn’t cover helping you fill the form. Please note we don’t deal with the credit agencies. But once the IRS issues Form 10916(c), removing the tax lien from your credit report is straight forward.

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Here are the instructions for Form 12277 cut and pasted from the IRS website.

Form 12277: Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien (as based on Internal Revenue Code Section 6323(j))

1. Attach a copy of the Form 668(Y), Notice of Federal Tax Lien, affecting the property, if available. You may also provide other documentation that you feel substantiates your request. If the information you supply is not complete, it may be necessary for the Technical Services Group Manager to obtain additional information before issuing the notice of withdrawal.

2. Please mail your request to the IRS, ATTN: Technical Services Advisory Group Manager, in the area where you live. Use Publication 4235, Technical Services Advisory Group Addresses , todetermine where to mail your application.

3. If a determination is made to withdraw the filed Form 668(Y), we will send you a Form 10916(c), Withdrawal of Filed Notice of Federal Tax Lien , and we will notify your creditors if you provide the names and addresses of the credit reporting agencies or financial institutions.

4. If, at a later date, additional copies of the Form 10916(c) are needed, you must provide awritten request to the Technical Services Group Manager. The request must provide thefollowing information:

a. The name, current address and taxpayer identification number of the person requesting that the credit reporting agency, financial institution or creditor be notified of the withdrawal of the Notice of Federal Tax Lien;

b. A copy of the notice of withdrawal, if available; and

c. A list of the names and addresses of any credit reporting agencies, financial institutions, or creditors that you want notified of the withdrawal of the filed Form 668(Y).

NOTE: This document also serves as our authority to release the notice of withdrawal information to the agencies or financial institutions you have identified.

Here’s a verbatim copy of IR-2011 that describes the revised parameters for tax lien withdrawal.

IR-2011-20, Feb. 24, 2011

WASHINGTON — In its latest effort to help struggling taxpayers, the Internal Revenue Service today announced a series of new steps to help people get a fresh start with their tax liabilities.

The goal is to help individuals and small businesses meet their tax obligations, without adding unnecessary burden to taxpayers. Specifically, the IRS is announcing new policies and programs to help taxpayers pay back taxes and avoid tax liens.

“We are making fundamental changes to our lien system and other collection tools that will help taxpayers and give them a fresh start,” IRS Commissioner Doug Shulman said. “These steps are good for people facing tough times, and they reflect a responsible approach for the tax system.”

Today’s announcement centers on the IRS making important changes to its lien filing practices that will lessen the negative impact on taxpayers. The changes include:

• Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.

• Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.

• Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.

• Creating easier access to Installment Agreements for more struggling small businesses.

• Expanding a streamlined Offer in Compromise program to cover more taxpayers.

“These steps are in the best interest of both taxpayers and the tax system,” Shulman said. “People will have a better chance to stay current on their taxes and keep their financial house in order. We all benefit if that happens.”

This is another in a series of steps to help struggling taxpayers. In 2008, the IRS announced lien relief for people trying to refinance or sell a home. In 2009, the IRS added new flexibility for taxpayers facing payment or collection problems. And last year, the IRS held about 1,000 special open houses to help small businesses and individuals resolve tax issues with the Agency.

Today’s announcement comes after a review of collection operations which Shulman launched last year, as well as input from the Internal Revenue Service Advisory Council and the National Taxpayer Advocate.

Tax Lien Thresholds

The IRS will significantly increase the dollar thresholds when liens are generally filed. The new dollar amount is in keeping with inflationary changes since the number was last revised. Currently, liens are automatically filed at certain dollar levels for people with past-due balances.

The IRS plans to review the results and impact of the lien threshold change in about a year.

A federal tax lien gives the IRS a legal claim to a taxpayer’s property for the amount of an unpaid tax debt. Filing a Notice of Federal Tax Lien is necessary to establish priority rights against certain other creditors. Usually the government is not the only creditor to whom the taxpayer owes money.

A lien informs the public that the U.S. government has a claim against all property, and any rights to property, of the taxpayer. This includes property owned at the time the notice of lien is filed and any acquired thereafter. A lien can affect a taxpayer’s credit rating, so it is critical to arrange the payment of taxes as quickly as possible.

“Raising the lien threshold keeps pace with inflation and makes sense for the tax system,” Shulman said. “These changes mean tens of thousands of people won’t be burdened by liens, and this step will take place without significantly increasing the financial risk to the government.”

Tax Lien Withdrawals

The IRS will also modify procedures that will make it easier for taxpayers to obtain lien withdrawals.

Liens will now be withdrawn once full payment of taxes is made if the taxpayer requests it. The IRS has determined that this approach is in the best interest of the government.

In order to speed the withdrawal process, the IRS will also streamline its internal procedures to allow collection personnel to withdraw the liens.

Direct Debit Installment Agreements and Liens

The IRS is making other fundamental changes to liens in cases where taxpayers enter into a Direct Debit Installment Agreement (DDIA). For taxpayers with unpaid assessments of $25,000 or less, the IRS will now allow lien withdrawals under several scenarios:

• Lien withdrawals for taxpayers entering into a Direct Debit Installment Agreement.

• The IRS will withdraw a lien if a taxpayer on a regular Installment Agreement converts to a Direct Debit Installment Agreement.

• The IRS will also withdraw liens on existing Direct Debit Installment agreements upon taxpayer request.

Liens will be withdrawn after a probationary period demonstrating that direct debit payments will be honored.

In addition, this lowers user fees and saves the government money from mailing monthly payment notices. Taxpayers can use the Online Payment Agreement application on IRS.gov to set-up with Direct Debit Installment Agreements.

“We are trying to minimize burden on taxpayers while collecting the proper amount of tax,” Shulman said. “We believe taking away taxpayer burden makes sense when a taxpayer has taken the proactive step of entering a direct debit agreement.”

Installment Agreements and Small Businesses

The IRS will also make streamlined Installment Agreements available to more small businesses. The payment program will raise the dollar limit to allow additional small businesses to participate.

Small businesses with $25,000 or less in unpaid tax can participate. Currently, only small businesses with under $10,000 in liabilities can participate. Small businesses will have 24 months to pay.

The streamlined Installment Agreements will be available for small businesses that file either as an individual or as a business. Small businesses with an unpaid assessment balance greater than $25,000 would qualify for the streamlined Installment Agreement if they pay down the balance to $25,000 or less.

Small businesses will need to enroll in a Direct Debit Installment Agreement to participate.

“Small businesses are an important part of the nation’s economy, and the IRS should help them when we can,” Shulman said. “By expanding payment options, we can help small businesses pay their tax bill while freeing up cash flow to keep funding their operations.”

Offers in Compromise

The IRS is also expanding a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers.

This streamlined OIC is being expanded to allow taxpayers with annual incomes up to $100,000 to participate. In addition, participants must have tax liability of less than $50,000, doubling the current limit of $25,000 or less.

OICs are subject to acceptance based on legal requirements. An offer-in-compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

Related Items:

• IRS Begins Tax Season 2009 with Steps to Help Financially Distressed Taxpayers; Promotes Credits, e-File Options ( IR-2009-2)

• IRS Speeds Lien Relief for Homeowners Trying to Refinance, Sell ( IR-2008-141)

53 comments to Tax Lien CPA explains IRS Form 668(Y), Form 10916(c) and IRS Form 12277 | IRS Tax Lien Release | IRS Tax Lien Withdrawal

  • Billy

    What about a STATE tax lien? Can that be removed? if so, what is the form number?

    • Gary Bode CPA admin

      We concentrate on federal issues in this post. But you’re right. The removal process is technically different from State to State. I would call their Department of Revenue, probably in the Capitol city. Hope that helps.

  • Dwan J

    Thank you for having a site with great information first of all. But my question is I have received a tax lien RELEASE on both tax liens that was placed on my report. I know want to attempt to have them removed from my credit report. I want to file for a withdrawal but I’m confused on which form to file and what steps is needed to attempt this accomplishment. Please give me any advice.


    • Gary Bode CPA admin

      Hi Dwan: I don’t deal with the credit reporting once the release is obtained, sorry. But you rights as a consumer concerning credit reporting. Let me know how it turns out please.

  • Hoping for withdrawal of lien release

    Hello Dwan J
    Form 12277: Application for Withdrawal of Filed Form 668(Y)
    In your statement to the IRS include copy of your released lien and also any other circumstances that would explain.
    Also, in your statement ask the IRS to send a copy of the withdrawn release to the Credit agencies (include their addresses).
    I am doing this right now too.
    Good luck!

  • Mike

    Thanks for the helpful information. Had a couple follow up questions for you. I have a client who has a federal tax lien and owes about $28k. He’s hoping to raise enough funds this year from a new business to settle the lien, and has asked for procedural help. His MFJ AGI over the last 3-4 years has been $80-90k and he has three dependent children. He has no significant assets other than the intangible value in his small business.

    Based on your article, I wonder if there is an opportunity to resolve the matter through an OIC or installment arrangement. In your experience, what factors are most important in pursuing one of these avenues? Could my client make an initial payment to reduce the deficiency to < $25k and enter into an installment arrangement?

    If my does client does raise sufficient funds to satisfy to deficiency, would we file the Form 12277 contemporaneously or will the Service provide some sort of payment acknowledgement we'll need to include with the Form 12277?

    I appreciate your insight!

    • I don’t know about the OIC, as you know this is a convoluted topic Mike. I’d need specifics. But an Installment Agreement should work, but it’s not automatic. Check the limit, should still be 25G. Yes you have to file for the lien release.

  • Donna

    Hello Mr. Bode The situation am in right now is i have 4 federal tax liens on my credit report, 2 are recorded in my county’s city clerk office. They total amount owned on the leins are about 62,000.00. Due to these liens am unable to obtain any type of loan for a home. My taxes at this point are in non-collectable status,dating back to 2002 to present. Is there any way the irs will lift a lein , so that i may purchase a home. I’am not able to pay them in full but, could pay on installments every month. And, am in non- collectable status can they contiue to place leins. Thank you in Advance for your advice.

    • You want them to withdraw the liens to get them off your credit report Donna. Paying off $62,000 over 7 years, say, is a cash flow issue. I wouldn’t expect the IRS to with draw the liens until the aggreagte is less than $25,000 and you’ve faithfully on them for 9 months. Sorry, I don’t see an immediate way to get from here to there.

  • angela

    I know I have a tax lien but how do I get a copy of my 668(Y)?
    I’m in Maricopa county, Arizona and i’ve been looking for hours on the internet and have found nothing.

  • Randy Bullock

    Hi Gary,

    I was the CEO of a construction firm that went broke about 10 years ago. The comptrollerand I were held personally responsible for certain trust taxes that did not get paid. The total was about $ 155,000, and is now paid down to approximately $ 87,000. I have a payment plan in place and pay a little over $ 522 per month. I have 4 years left before the 10 year statute of limitations is over. The IRS recently filed a 668(Y)(c)against me at my county’s court house. I have about $ 76,000 in an IRA account and want to withdrawal $ 8,000 to buy a vehicle. I have read on the internet (site by a well known tax attorney):

    “It is arguable that IRS’ levy attaches to an IRA account. An IRA account can be liquidated unconditionally by the owner at any time, provided that he is prepared to pay the taxes on the accrued interest, plus the 10% early withdrawal penalty.”

    Well, English is my native tongue, and that seems to be saying two things at the same time. My question: Is it legal for me to withdrawal $ 8,000 from my IRA account to buy a vehicle? The penalty would not apply as I am 64 years old.


    • Hi Randy: well if you can withdraw it, you’re taxed on it as ordinary income. Sounds like the 10% additional tax isn’t an issues. I don’t know if it’s legal to withdraw from the IRS account. That’s a question best answered by a Lawyer.

  • Gaby

    I am going through this process right now I am completing a 12277 form attaching a proof of release and also asking that this get distributed to Credy Agencies so that it is removed off my record.

    I was told however I would have to personally reach out to top credit agencies and pass along the proof of release to them directly. I have not done this yet but will do to try anything to get this removed.

    One question can anyone tell me where to find my 668(Y) serial number? or record overvall? I was told to contact the IRS for this but no luck on locatin my actual notice of Federal Tax Lien

  • Gaby

    I am going through this process right now I am completing a 12277 form attaching a proof of release and also asking that this get distributed to Credy Agencies so that it is removed off my record.

    I was told however I would have to personally reach out to top credit agencies and pass along the proof of release to them directly. I have not done this yet but will do to try anything to get this removed.

    One question can anyone tell me where to find my 668(Y) serial number? or record overvall? I was told to contact the IRS for this but no luck on locatin my actual notice of Federal Tax Lien

  • kenny g

    Hi I see it says set up direct payment and they will withdraw but iy also says I have to request it q: how do I request that it be removed my direct is already set up. Thanks in advance

    • Hi Kenny: I think you mean you wish to setup an Installment Agreement with the IRS, Use Form 9465, Installment Agreement Request. I have posts that discuss some strategies. Once you demonstrate some “good faith” the IRS will withdraw the tax lien. Hope that helps.

  • Steve

    Form 12277: What can be used as a “basis for withdrawl request” when answering question number 12 on IRS Form 12277?

  • Talia

    Hi Gary-
    Does this apply to state tax liens too? Or is this just available for federal tax liens?

  • Maria

    Hi Gary-

    I work for a professional that needs to renew his license but can’t because of a lien. He owes about 39,000 federal. What can he do?

    Thanks in advance

  • R Gordon

    Hi Gary,

    I filed and was approved for an Offer in Compromise in May of 2008. Aside from a Federal Tax Lien (showing as paid), I have 10+ years of spotless credit and a 720ish credit score. Can I file form 12277 to have the Paid Tax Lien removed (and subsequently removed from my credit reports)? Thanks!

  • Amanda

    I am hoping you can help with the form to release my tax lien to purchase a home is there even such a form? How do I go about getting this started!

    • Hi Amanda. I know a federal tax lien kills credit. Getting the liens withdrawn by the IRS takes about 30 days. The IRS will send letters to all three credit agencies. I don’t how long it takes the credit agencies to clear the lien off your credit report. We can make application to the IRS if you’d like. (910) 399-2705. Give me a call if you wish Amanda.

  • John Shammas

    How about when the debt is cleared by bankruptcy? Is there different procedure to withdraw the lien from my credit?

    • What I’ve listed is only way I know to obtain federal tax lien withdrawal. Hope that helps John.

      • R Gordon

        After Gary’s advice, I recently filed IRS Form 12277, and had to appeal an initially denied request. It has been about 4 weeks and the items are still on my credit, so I’m not sure how long it takes until they are removed. I’ll update when I find out. Thanks again Gary.

  • R Gordon

    Follow up to approval of IRS Form 12277: This is a doable (but not easy) process. As I wrote in an earlier comment, the approval was originally denied and then had to be appealed to be approved. I requested that the IRS notify the credit bureaus, and after about 5 weeks they were never notified. I sent out my own notifications – within 1 week TransUnion removed the lien from my credit and my CS shot up over 70 points from 740 to 812. I just got a letter from Equifax and they sent a reply saying that it was already being reported as released – After about an hour on the phone with a rep and then supervisor, I finally got my point across that “released” and “withdrawn” are two completely different scenarios. Released stays on your credit still, while withdrawn is completely removed as if it never existed. Equifax is now removing it as well. Experian has still not responded to me yet…

  • Jayma Davis

    We requested a Certificate of Release of the Federal Tax Lien due being
    Uncollectable (10 years).
    Should we also request the Lien Withdrawal now or
    Wait until we hear from IRS regarding the certificate of release?
    I did have the reversed on the first request ….. Sorry

  • trevor

    trying to buy a property that has a federal tax lien from a previous owner that is now deceased how doI contact the irs to release the lien now owned by 18 year old son of deceased owner. the property deed has been transfered from trustee to 18 year old.

  • Joanna

    My husband did a credit check on himself and there are tax liens on there. Some have “filed” and some have “released” in the status: line. And in the court: it has “recorder of deeds”? Also they all have a reference #, where do I look that up? Some just say “tax lien” and some say “state tax lien”! A few of them are duplicates, those have the “released” on them, but others don’t, where do we go to find out what these are and who they are from? All of his taxes are now caught up. We did 6 years of taxes all at once, do to a business he had and closed do to medical condition! How do we get this fixed and the liens taken off, we only have one “tax lien notice” paper from one of the years that we caught up, I can’t find any other papers, I think those ones are long gone, if we need those “notices” how do we get copies of them or do we need them for the IRS to remove these liens?

  • Robert P

    Dear Mr. Bode:
    Great sit.

    Simply, I have filed, and have had Federal Bankruptcy discharged in 2012
    Additionally, I have three federal tax liens, all of which are for the same amounts posted in two different counties notated on my credit reports.

    I did file a 12277 along with copies of my 668(y)to two IRS facilities in my state where each of the liens were filed. The 668(y) was easily obtained by calling the Centralized Lien Processing department at 800-913-6050.

    My question is this: since all of the liens have been RELEASED as indicated on my 668(y) statement. Several of them are beyond the 30 day recovery date in group (e) (Last Day for Refilling) which I believe should put them in “Self Released” category is that correct?

    Should I be granted a 10916(c) from the IRS, will this also release any liens on public records, as well as credit reporting companies?

    Thank you.

  • Henry Press

    I just got back from Camarillo CA. IRS office. I went in with a completed typed form 12277. and 2 different FTL copies of 2 county recorder notices of lien filing. I was told there was “no known 10916(c) withdrawal of FTL”. I was told by the IRS agent that all I have to do is show the county recorder the lien filings and that the refile deadline passed with no refiling and they will take it off record. I called county recorder and they said you need the 10916(c)from IRS. So here is some backround; nothing tolled the statute. Tax years 1999,2000, and 2001 filed in 4/04, 5/04,and 5/04 the CSED expired. I was in uncollectible status, so statute keep going. The lien is a derogatory on my credit reports. I otherwise have no other liens, judgments, collections or late payments. So much for FRESH START! Any procedure I missed?

  • Robert E. Reynolds

    My wife’s father closed his real estate office in 2001 at age 85 and not in good health. He did not file a 2001 return as he closed the business after several years of losses. He died at age 92 in 2008. My wife is the only child and his old attorney advised us not to probate the will with the tax lien and money he owed. IRS issued a Form 668 Y showing a assessment of $205054.23 for 2001 as he did not file nor claimed any business losses. The added $2148.00 in 2002 and 2148.00 in 2003 and show the tax lien will expire 10-3-2017. It shows the notice was prepared and signed on 29th of January 2010 and he died in July 2008. My wife wanted me to see if I can get this to release the lien before 2017 as she is 77 and would like it cleared before anything happened to her. The question is ” if we filed the form 12277 and request the lien to be removed by them sending us a Form 10916(c) is it worth the effort. We would not pay anything but ask it be removed for her peace of mind.

  • phyllis scott

    Hi Gary,I have been working on my credit report for a year now by whole dept is 20.00 i have one secured card wish i charge 20.00 a month for gas my credit score has raise from 550 to 654 I was wondering i have a Ohio tax Lien on my credit report that is release and paid in full how can i get this remove.I have sent copy’s to the credit reporting agencies still on credit report saying release can i get this removed and how and will it raise my score.

  • MARK




  • DK

    So is it safe to say that the WIthdrawal of Filed Notice of Federal Tax Lien does not mean it was paid; it just means they are no longer holding the lien over the individual?

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