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Tax Lien Removal: Guide on How to Release/Remove IRS Tax Liens

When it comes to collection actions, there is no arm longer than that of the Internal Revenue Service. Anyone who has experienced the collection methods used by the IRS can attest to the swift and sometimes merciless methods used to collect taxes owed. The IRS will not waste time hounding taxpayers for an unpaid bill. Instead, they will notify you of any tax liabilities you owe, and then take action to collect that debt. Collection actions may include wage garnishments, liens and levies. Here we look at what you can do if you owe the IRS money and they respond by placing a tax lien on your property.

Assess Your Tax Lien Situation

Realize that the IRS just wants you to get back into good standing with them and they are willing to work with you. The IRS does realize that not all people can pay their taxes in full and have other options. It is important to assess your current financial and tax situation and make a determination about how much you can afford to pay, if anything at all. Below are some methods a tax lien can be released.

Pay Taxes Owed in Full

The first reaction and often the best way to resolve a tax lien would be to pay the tax liability in full. This is one surefire way to remove an IRS tax lien. It is important before making arrangements to pay the tax bill in full, to make sure this is the best use of your money. When would paying off the tax liability not be the best use of your money? If you have additional tax bills which are due, thus pending tax liens on the horizon, paying your bill in full might not be the way to go. Assuming of course that you do not have the resources to pay all of your tax bills at the same time.

Direct Debit Installment Agreement

Before February 2011 a tax lien was required to be paid off in full prior to the lien being withdrawn. Now the IRS allows taxpayers to have a tax lien withdrawn by entering into a direct debit installment agreement (DDIA). With a DDIA, funds are automatically debited from the taxpayer's checking account for the amount that was initially agreed upon. The IRS prefers this type of installment agreement because the default rates are much lower. In order to qualify for this type of installment agreement, you must have less than $25,000 in IRS debt.

Setup an Installment Agreement

If you do not qualify for a direct debit installment agreement to pay back the taxes owed, you may qualify for an installment agreement. With an installment agreement you will be allowed to pay back the taxes over time without further collections actions by the IRS. The big downside to this method is that the tax lien will remain in place until the entire balance of taxes and penalties is paid off.

Negotiate a Settlement

You may have heard about debt settlement at it pertains to other debts.  This process is legal and often used as an alternative to filing bankruptcy for borrowers who owe a debt and cannot pay that debt in full. To qualify for debt settlement you must prove to your creditors that you are dealing with a financial hardship and cannot pay the debt owed in full anytime in the near future.  It is important to note that the IRS may consider a settlement or reduced payoff if certain conditions are met. Unlike other creditors however, the IRS is not as inclined to agree to negotiations unless extreme circumstances can be proven. The method in which the IRS allows taxpayers to settle their debts for less is through an offer in compromise.

Typically an offer in compromise is an extremely difficult program to qualify for, but recently the IRS announced it expanded this program to include a streamlined offer in compromise to cover a larger group of taxpayers. Generally these types of agreements will still not be accepted if the IRS believes the taxes owed can be paid back in a lump sump or through a different payment option offered by the IRS.

Expiration of Statute of Limitations

The standard statute of limitations of IRS debts is 10 years from the date the IRS assessed the taxes owed. Once the 10 year period has passed, the taxes are no longer owed (unless for some reason the statute has been extended). The lien may still exist on your credit after the 10 years and you will have to request the lien to be removed by contacting the centralized Lien Unit.

Release of Tax Lien

Whether you pay the tax bill in full or negotiate a settlement or payment plan for the taxes owed, it is important to follow up to ensure the lien is in fact removed. It is not uncommon for tax liens to remain even after the taxpayer has made arrangements with the IRS to pay the tax liability. If you have made arrangements which have been approved by the IRS, you will want to remain vigilant to ensure the tax lien is in fact removed as promised.If you have met the requirements set forth by the IRS to resolve your tax issues and initiate the removal of a tax lien and the IRS does not release the lien, you will have to take action to have it removed. This will involve contacting the Centralized Lien Unit and providing proof that the tax bill has been paid as agreed. You can reach the centralized lien unit at 1-800-913-6050 to request a certificate of release which you must then record to be free of the lien.

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