If you are facing a tax lien you may be wondering: Is it possible for a tax lien to be removed or released? The answer is yes, but understanding the distinction between ‘removed’ and ‘released’ when it comes to liens significantly matters. As we delve deeper into each term’s meaning and the conditions that have to be met for their occurrence, you’ll learn how you can work towards their resolution and avoid future tax liens.
Understanding Tax Lien Removal Vs. Release
A tax lien removal implies that the lien is entirely extinguished from public record. It’s as though it never existed in the first place. Tax lien release, however, does not erase the lien but indicates that the lien is no longer enforceable because the debt has been fully paid or the statute of limitations on the debt has expired. This distinction is important to grasp while seeking a removal or release.
When Does a Removal or Release Occur?
Tax Lien Removal
Tax lien removal can occur under certain conditions like when there’s a judicial decision to eliminate the lien, or when the IRS decides to withdraw the lien. Notably, the IRS may withdraw a tax lien if it’s in the best interests of the government and the taxpayer, such as when the withdrawal will facilitate collection of the tax liability or will serve as a viable means to pay the liability.
Tax Lien Release
A tax lien is generally released when the debt in question has been fully settled, either through a lump sum payment, successful completion of an installment agreement, or after a successful Offer in Compromise has been fulfilled. The lien could also be released if you can prove that the statutory period for tax lien collection—generally 10 years—has expired.
Certain Conditions That Lead To Removal or Release
A tax lien can be removed or released under these key scenarios:
- Full Payment of Tax Debt: Once your tax debt has been fully paid, the IRS will release your lien within 30 days of payment. If you can manage to pay the outstanding debt in full, it’s the quickest way to resolve the lien issue and move forward.
- Setting Up a Payment Plan: The IRS may release a tax lien if you agree to a payment plan with an automatic monthly withdrawal. This is an alternative for those who cannot afford to pay the debt in full. A Direct Debit Installment Agreement (DDIA) plan will show the IRS that you’re committed to making timely payments and respecting the payment schedule.
- Offer in Compromise (OIC): An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. If you have an Offer in Compromise accepted and paid, the lien will be released. Remember, however, that negotiation for an OIC can be a complex process and often requires professional assistance.
- Expiration of Statute of Limitations: The IRS has 10 years to collect the tax liability. If this period expires, the lien will be released. It’s important to keep track of the collection statute expiration date (CSED) to see whether the limit has passed, and consult a professional if necessary.
Avoiding Future Tax Liens
The most ideal option is to avoid a tax lien altogether. This includes making timely tax payments and abiding by all tax laws. If you’re unable to pay your tax bill in full, contact the IRS to discuss your payment options.
In this entire journey, professional help like Creative Tax Solutions can provide valuable advice and assistance, particularly when dealing with complex tax issues. Our experienced team, including Thomas Patti, Marla Klein, Adam Hastie, and Don Murry, understands the intricacies of tax laws and contacts with the IRS. We help individuals negotiate tax liabilities and work towards lien release or removal.
With a history of serving over 20,000 clients, Creative Tax Solutions offers a no-obligation, free consultation, where they acquaint you with possible solutions and advice. Getting professional advice can make the process smoother and more efficient, allowing you to focus on your personal and financial well-being.
In conclusion, while tax liens can cause significant inconvenience and disrupt your finances, multiple options exist for their removal or release. The key is to act promptly and explore alternatives to resolve the issue while complying with tax laws and making timely payments.