If you received Form 668(Y), you probably didn’t have a tax lien CPA. And the IRS is probably demanding too much tax. There are still some moves left during the end game of IRS collections and you should consider seeking a tax lien CPA now. We’ll discuss how to get the IRS to release and withdraw the tax lien, along with important factors to consider during the process.
- You apply to have the lien released through Form 12277.
- The IRS then issues Form 10916(c).
- You present Form 10916(c) to the three credit reporting agencies.
Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien.
You request the IRS to release the tax lien through Form 12277. Tax liens kill your credit because the country’s strongest creditor makes it a public record. Plus they’re about to seize your assets or garnish your paycheck. The IRS gets preference over all other creditors. Here’s how a tax lien CPA might approach the process.
- Let’s say you engaged me after the tax lien is in place. The first thing I’d do is ask the IRS and State for more time. If you haven’t had a tax lien CPA working the case, the IRS usually grants more time to prepare your case.
- If you let the IRS prepare “substitute returns”, the amount of back tax they’re demanding is too high. I can’t remember a case where preparing correct returns didn’t reduce the amount of the demand. It may be hard to believe, but preparing those returns can result in a refund. Yes, you read that right.
The rest of the reasons the IRS would approve your Form 12277 assume they are demanding the correct amount.
- Will they settle for less? In 2012 the IRS streamlined the infamous Offer in Compromise process. This pennies on the dollar technique got abused in the last century and public outcry resulted in stricter qualifications. But the recession prompted them to relax the standards in 2012. Generally an Offer in Compromise deserves CPA help, especially if a tax lien is in place. Once the Offer in Compromise is accepted, you can file Form 12277.
- A study a few years ago showed the IRS violated its own guidelines during the tax lien process with 32,000+ taxpayers. You’d need a tax lien CPA to see if that happened to you. If it did, they have to issue Form 10916(c). But the IRS has experience here and removing the lien probably just buys time to come up with another solution.
- If the IRS accepts an Installment Agreement (Form 9465), the IRS will issue Form 10916(c) after they see some period of compliance.
- Sometimes a CPA can make a point that the tax lien actually decreases the IRS chances of collection. Then we file Form 12277.
I’m a tax lien CPA with a virtual office to help clients who aren’t lucky enough to live in Wilmington NC (wink). There are a dozens of articles on various aspects of tax liens, back taxes, and IRS collections. If you don’t have a local tax lien CPA, or just like what you read, consider calling me for a free phones consult at (910) 399-2705.