If the government has imposed a tax lien against you because you owe back taxes, it can affect your ability to get approved for a much-needed loan or refinancing. Additionally, if you do not take the proper actions once your property is under a tax lien, the government could initiate a levy and take possession of your assets (which are then sold to recoup what you owe to the IRS).
That said, a tax lien is not a permanent scar on your financial history. You can remove a tax lien and restore good faith with lenders so you can move forward with this tax blunder effectively in your past, and the experts at Community Tax are here to help you.
In this guide, we’ll cover the ins and outs of how to remove it from public record and how to prevent ending up in this situation again. Use the links below to navigate to the section that best answers your question, or read this post from start to finish for a comprehensive understanding.
- How to Remove a Tax Lien
- Removing a Tax Lien from Public Record
- Get Professional Help with Tax Lien Removal
How to Remove a Tax Lien
If you’ve received a Notice of Intent to File a Tax Lien from the IRS or already have a lien placed on your account, of course you want to figure out how to remove it as soon as possible.
The IRS removes tax liens when:
- There has been an error: In some cases, the tax lien may have been imposed in error. As with any administrative mistake, sometimes it is assigned to the wrong tax payer. If this is found to be the case, contact the IRS and notify them that there has been an error. Once they confirm that the lien was assigned incorrectly, they will remove the it.
- The balance has been paid or satisfied: Cooperating with the IRS to pay the income taxes you owe is typically the best course of action. You can either pay back the amount you owe in full, or you can try to arrange an agreement with the IRS to pay your back taxes over time.
In some cases, the IRS may consent to a partial payment—if you are unlikely to be able to repay the full amount in a reasonable amount of time due to financial hardship.
- The statute of limitations has passed: The federal statute of limitations, or the amount of time the IRS has to collect your tax debt, is 10 years. However, if you have a state-issued lien, the timeline may vary depending on the state’s laws on statute of limitations.
After the statute of limitations expires on your tax lien, it is no longer enforceable. However, the IRS can refile it within that time, so you may not be able to escape the debt you owe after 10 years. It is also important to note that if you are in a payment plan or agreement with the IRS for repaying your debt, this debt repayment timeline can be extended.
If you need tax assistance, don’t hesitate to reach out to one of our tax experts who can help you navigate the process and achieve removal.
IRS Processes for Removing a Tax Lien
When it comes to understanding how to remove a tax lien, you should be aware of the implications of how one is removed.
- Tax lien withdrawal: This is the method of removal that can be used before an actual lien has been placed on your account. This is how a tax lien is removed when you pay your balance as soon as you receive the Notice of Intent to File a Tax Lien in the mail.
A tax lien is typically placed on your account 10 days after the IRS has notified you of their intent, so it’s important to act quickly if this is the outcome you prefer.
- Tax lien release: This is the method of removal that is used after one has been placed on against you. Payments can be made over time or in full, depending on your arrangement with the IRS. Once you have paid off your tax debt, the IRS will issue a lien release.
To have the IRS withdraw a tax lien, you will need to submit Form 12277. Once your tax debt has been paid, the IRS is required to remove the tax lien within 30 days.
Preventing a Lien
There are several ways to prevent a tax lien from being placed on your account, including:
- Full payment: If you are financially able to pay back your debt in full, this is the simplest route to preventing a tax lien.
- Installment agreement: Arranging an installment agreement with the IRS allows you to make monthly payments on your back taxes. In order to qualify for an installment agreement, you must owe less than $50,000 as an individual or $25,000 as a business.
- Offer in compromise (OIC): An offer in compromise allows you to negotiate your tax liability, so that you can settle your tax debt with the IRS for less than the full amount owed. You may be approved for an offer in compromise based on either doubt as to collectibility, doubt as to liability, or effective tax administration.
- Appeal: If you disagree with the IRS decision to put a lien on your account, you can file an appeal. You will need to submit a written appeal to the collection office that initiated your notice. If necessary, it will then be escalated to the Office of Appeals.
- Bankruptcy: In some cases, filing for bankruptcy may be an option for preventing a tax lien from being placed on your account. It is important to keep in mind that there are different types of bankruptcy and only certain tax debts can be resolved. However, if you file bankruptcy before the IRS issues a Notice to File a Tax Lien, it should be discharged.
To avoid the threat of tax lien from being placed on your account in the first place, make sure that you file and pay your income taxes on time. If you need help preventing a lien, Community Tax can help you determine which measure is the best course of action based on your circumstances. With one of our tax experts by your side, you can rest assured that the proper steps are being taken and we will help you find the best possible resolution.
Removing a Tax Lien from Public Record
Removing a tax lien from your public record is an important step in restoring your credit, so that you can borrow as needed in the future. If you need to figure out how to remove a state tax lien from public record, we have you covered. Removing one from public record can be fairly simple if you follow these steps:
1. Request a Copy of Your Credit Report
When you receive a copy of your credit report, find the lien. Your credit report should include the balance of how much tax debt you owe. If you’ve paid off all of your tax debt, this balance should be zero. If you haven’t started the repayment process, this line item will show how much you owe in back taxes.
In addition to checking the balance reflected on your credit report, you should also confirm the balance with your state department or the IRS.
2. Pay Off Your Balance
If you have not already, you will need to finish making payments on your tax debt to have it removed from your public record. If you have entered into a payment plan with the IRS, make sure that you continue to make your payments on time. Once your payments are complete, ask the state office for a paid-in-full letter.
3. Write a Goodwill Letter to Credit Reporting Bureaus
Once the debt is repaid, you should write a goodwill letter to the credit bureaus who are reporting the tax lien. This will provide context as to why you fell behind on your taxes and the efforts you’ve made to repay them—make sure to include any documentation regarding your tax lien and your payment. Along with your letter, you should send:
- Paid-in-full letter
- Documentation related
- Bills and documentation that can help verify financial hardship
Removing a tax lien from your credit report can take several months, but in many cases, is well worth your time.
Get Professional Help
Tax law, payment negotiation, and figuring how to remove a state tax lien from public record are complex. By having one of our tax professionals handle the process on your behalf, you can move forward with confidence, instead of constantly questioning whether you’re taking the right steps, are paying too much, or have missed anything important.
If you need help, please contact us today so we can review your case and get the process started. The sooner you work on this situation, the sooner you can move forward with your life.