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Removing An IRS Federal Tax Lien

By on December 24, 2010 in Tax

The Internal Revenue Service is exceptionally efficient at collecting overdue taxes. In addition to garnishing your wages, withholding your annual tax refunds and levying your bank accounts, the IRS also reserves the right to file a tax lien against you. Unlike many varieties of lien, a federal tax lien isn’t property specific. Thus, once the IRS files the lien, it immediately applies to your real estate, vehicles and any other property that you may own.

Pay Off the Tax Lien

By far the quickest way to remove an IRS tax lien is simply to pay off the debt. If you cannot afford to pay your back taxes in one lump sum, you can request a payment plan or tax settlement, known as an “Offer in Compromise.“ Once you’ve repaid your tax debt in full, the IRS will issue you a Certificate of Release. This document provides you with legal proof that any liens previously applied to your property by the IRS are no longer valid.

When paying off back taxes to release a property lien, keep in mind that the tax debt you owe may increase over time. You must pay off the adjusted amount, plus any additional fees required by your jurisdiction to release the lien before you can request a formal Certificate of Release.

Wait for the IRS Lien to Expire

Like most debts, IRS liens possess a statute of limitations. A federal tax lien expires ten years from the date it was originally filed. Although the IRS has the option to renew a tax lien under certain circumstances, it rarely chooses to do so.

Because federal tax liens expire after ten years, its important to assess precisely when the IRS originally filed the lien before paying it off. Otherwise, you may find yourself paying off a lien that is due to expire within a few months.

Appeal the Lien

Occasionally the IRS will levy a tax lien against a consumer in error. If a procedural error resulted in a lien being filed against you incorrectly, you have the right to dispute the lien with the IRS. Even if you legitimately owe what the IRS claims you owe, that doesn’t necessarily mean that you lack grounds on which to successfully dispute your lien. If you were involved in a bankruptcy at the time the lien was filed, were never notified of your original debt or the statute of limitations expired before the IRS filed its lien, you can contest its validity and request an immediate lien release.

Under certain circumstances, the IRS will release its lien from a given piece of property long enough for you to transfer ownership of that property to another individual. Keep in mind, however, that the IRS is under no obligation to release you of your liability to pay off the taxes that you owe. In addition, an IRS tax lien appears on your credit report and will continue to appear until seven years from the day you pay off your back taxes or for fifteen years, whichever comes first. This adversely impacts your credit and makes it more difficult for you to get approved for loans, credit cards, insurance and any other service that requires a credit check. Thus, you should do everything within your power to remove an IRS tax lien as soon as you become aware of its existence.

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