Sometimes an IRS lien is more of a stalemate than an end move. I’ve presented some examples of options you might have left, even though you’re in check. (910) 399-2705.
As an IRS tax lien CPA I often have new Clients in the end stages of an IRS battle. But there are can still be cards to play.
You may not need an IRS tax lien withdrawal CPA to file Form 12277. Remember, there are still positioning strategies that might help you get on with your financial life sooner, even before release of the federal tax lien. If you need CPA help, consider calling us at (910) 399-2705. Sometimes experience counts.
Release vs. withdrawal for IRS tax liens
- A release is a formal document showing the tax lien is paid in full.
- A withdrawal means they’ve taken the lien off your records.
- Otherwise the credit agencies show it on credit reports for seven years.
IRS tax liens vs. levies
- A tax lien is a public document showing you owe the IRS money. It may specify claims to certain assets, which means you can’t sell them.
- An IRS levy means the IRS seizes assets covered in the tax lien and/or garnishes your wages.
Steps in the Federal Tax Lien and Tax Lien Withdrawal Process
- Lots of preliminary IRS Notices arrive, each escalating the threat of a tax lien.
- It’s better to avoid an IRS tax lien if there’s enough time to maneuver.
- The IRS files the tax lien.
- The amount includes penalties and interest.
- They perfect the federal tax lien with the local county Register of Deeds.
- Now the IRS is the alpha dog among your creditors.
- You receive some version of IRS Form 668(Y)(c) notifying you of the lien.
- All three credit reporting agencies show the federal tax lien on your credit reports.
- Bingo, no bank or finance company will work with you.
- Employers balk at your job application.
- Sometimes the IRS levies (seizes) your bank account or garnishes wages.
- Every tax lien CPA and IRS agent has horror stories about the consequences of an IRS tax levy.
- You pay off the lien, often with a direct debit Installment Agreement.
- Other tax delay or relief techniques include:
- An Offer in Compromise. Maybe the IRS will accept less than what you owe as full payment, even with the lien.
- Being placed in currently uncollectible status. Here there’s no IRS levy or garnishment. Sort of like an IRS purgatory.
- Don’t forget to ask for penalty abatement before paying the IRS lien off.
- Other tax delay or relief techniques include:
- While the lien is in place some positioning is possible that allows partial relief.
- Check out Form 8821 and a payoff letter to make yourself more attractive to new creditors.
- Sometimes creditors will work with you if the tax lien balance is small enough.
- Maybe the IRS will release asset so you can sell it privately.
- If the IRS auctions it off, lots of equity escapes with the last gavel strike.
- Read about other strategies below.
- Check out Form 8821 and a payoff letter to make yourself more attractive to new creditors.
- They release the lien. But it still stays on your credit report for seven years.
- You ask the IRS withdraw the Lien through Form 12277.
- You get the credit reporting agencies to drop the lien from your credit reports.
- Don’t forget about your State. Coordinate your efforts with them too.
“There are still positioning opportunities open even before the IRS releases the lien.”
- Gary Bode, Form 8821 CPA
IRS Lien withdrawal before the lien is released
If you’ve been on an Installment Agreement (Form 9465) with the IRS, that uses automatic debits to your account, the IRS may allow lien withdrawal even the lien isn’t paid in full.
Other Sources of Help for Form 12277
- Call the IRS. They do thousands of tax liens. But they’re not always anxious to release or withdraw them.
- IRS Form 12277 instructions.
- Search the IRS website, lots of info pops up.
- The Internet.
- The taxpayer advocate.
Our website has multiple postings on Forms 668, Form 12277 and advice on how to prevent a tax lien (if there’s time). You can find them in the drop down Forms and Category lists in the right sidebar. Or by using the search bar. Your specific fact pattern determines how to approach tax lien withdrawal and maneuvering. Our advice helps but each case is different.
“Several strategies exist to coax the IRS to withdraw the federal tax lien even before the lien is paid in full. Maybe you can position yourself as an acceptable candidate for early withdrawal.”
- Gary Bode, IRS tax lien release CPA
Here’s some of what the IRS Website Offers
Cut and pasted.
Definition of a Federal Tax Lien
The federal tax lien gives the IRS a legal claim to the taxpayer’s property for the amount of the tax debt. The lien can be enforced for the amount of the taxpayer’s liability.
Filing a Notice of Federal Tax Lien
Filing the 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. Other creditors may also hold liens or secured rights against a taxpayer’s assets in the amount of indebtedness.
By filing the Notice of Federal Tax Lien, other creditors are publicly noticed that the United States government has a claim against all property, and any rights to property, of the taxpayer. This includes property owned at the time of the notice of lien is filed and any acquired thereafter. This notice is used by courts to establish priority in many situations, including bankruptcy proceedings or sales of real estate.
It is critical that local recording offices ensure that Notices of Federal Tax Liens are promptly filed and properly recorded. Failure to file and properly record the Notice of Federal Tax Lien in the local recording offices may jeopardize the United States government’s priority right against other creditors. This is extremely important to the interests of the federal government, other government entities, credit providers, and taxpayers in general.
“The best way to handle an IRS Federal tax lien is to avoid it. Many times I see folks who could have circumvented the IRS tax lien easily with less penalties and stress.”
- Gary Bode, IRS tax lien release CPA
Sometimes Tax Liens are Self-Releasing
This is uncommon. Look for a blurb beneath your name and address. Even if it self-releasing, you must request it be withdrawn.
Partial Releases
The IRS sometimes lists multiple folks on the tax lien. If you’ve paid off your share they may offer a Partial Release.
What if the IRS has made a Mistake (and yes this happens)
Try to get them to revoke the tax lien.
Lien Discharge
If your tax lien includes assets and you want to sell one of them, try getting the IRS to discharge that asset to facilitate transfer.
Can you remove the IRS as Alpha Dog Creditor?
Sometimes, for a specific asset they’ll subordinate that asset allowing another creditor to use it as collateral. So there some moves available even after the lien is perfected.
What do I do if there is someone or a Financial Company that’s willing to Help?
You can request a payoff letter using Form 8821. Allow a few weeks for the IRS to process Form 8821. The payoff letter shows the balance still outstanding on the federal tax liens.
Do you need a Form 8821 CPA or a Form 12277 CPA?
It depends on your comfort level. Sometimes we get involved with presenting Form 12277 because of the various strategies available to prod the IRS to offer early withdrawal. You’re presenting case before the IRS and experience helps. Other times we help clients maneuver while the tax lien is still in effect. Call (910) 399-2705.
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