A Tax Lien Withdrawal Releases Your Property

 There is one more method of negating a tax lien against a property. A Tax Lien Withdrawal removes the Public Notice of Federal Tax Lien from an asset. This makes it easier to sell or refinance a property or asset. Remember that the Internal Revenue Service (IRS) places a tax lien on property and/or assets when you fail to pay your taxes. This means that you cannot refinance or sell the property to which a tax lien has been attached. The IRS can place a tax lien on personal property for a tax debt owed by your business. Attaching a tax lien to personal property is one tool the IRS uses to impose a Trust Fund Recovery Penalty and collect a tax debt. However, if you enter into a direct debit installment agreement with the IRS regarding this tax debt, you may be eligible for a Tax Lien Withdrawal.

There are two options for eligibility for a Tax Lien Withdrawal:

For Option 1: The lien has been paid off and the property released from the tax lien so that the IRS is no longer prioritized regarding it. Criteria is as follows:

1. All tax returns for the past three years have been filed including individual, business and information returns.
2. All estimated tax payments and deposits are current.
3. Your tax liability has been released.

For Option 2: Direct debit installment agreement allows for the filing of a tax lien withdrawal. This includes converting a regular installment agreement into a direct debt installment agreement in which installment payments are directly paid from your bank account. Criteria is as follows:

1. Qualifying taxpayer: individual, business with income tax liability only and/or out of business entities with any type of tax debt. The IRS can place a tax lien on your business.
2. A tax debt of $25,000 or less is owed. If more than $25,000 is owed, a taxpayer may pay the amount down to $25,000 before requesting a Tax Lien Withdrawal.
3. Other filing and payment requirements are in full compliance.
4. Three consecutive direct debit payments have already been made.
5. There has been no default on current or previous Direct Deposit Installment Agreements.
6. The Direct Debit Installment Agreement must be paid in full within 60 months or before the collection statute expires, whichever is earlier.

There are other considerations for eligibility for a tax lien withdrawal:

1. The tax debt is less than $25,000.
2. Withdrawal of the tax lien is in the best interest of the government and the taxpayer.
3. It would be easier to repay the tax debt is the tax lien was withdrawn.
4. The taxpayer enters into an installment agreement to pay off the past due tax lien.
5. Evidence exists that the tax lien was not in accordance with IRS procedures or was filed prematurely.

The most important eligibility requirement for any Tax lien Withdrawal is entering into a Direct Debit Installment Agreement since installment payments are paid directly from your bank account. You can simply set this up online through the IRS website. You must also provide documentation to support your application for a tax lien withdrawal. Furthermore, you must list the financial institutions you would like notified of the withdrawal of the tax lien.

Applying for a tax lien withdrawal may be the best option for you if are wanting to sell your property and there is a public notice of federal tax lien on your assets, which renders them undesirable to buyers or creditors. Give us a call today to consult with a tax professional about your situation as to whether a Tax Lien Withdrawal is advantageous for you.

Tax Lien Discharge Reverts Property Back to You

 As stated in earlier blogs, the Internal Revenue Service (IRS) has several tools they use to collect back taxes owed: liens, levies, wage garnishments, etc. As the saying goes: there is no escape from death and taxes. The IRS has several means of protecting their interest in the event you fail to pay your tax debt in a timely manner.

The IRS has the power to place a Federal Tax Lien against all of your assets and properties: financial, personal, business and/or real estate. Federal tax liens vary depending upon each individual situation and case. By failing to pay the IRS timely, a lien will be attached to all of your current and future assets until the offending tax issue is resolved. Furthermore, the lien can develop into a levy which empowers the IRS to seize any of your assets to pay your tax debt if you do not address a tax debt in a timely manner. Assets include vehicles, personal properties, jewelry, coin collections, real estate properties, stocks, bonds, cash, bank accounts, even bitcoin. Resolving your tax debt prevents a lien from being assessed or resolves one that has already been attached to any of your properties. 

It is called tax lien discharge. A discharge removes the tax lien from the specific property to which it was attached, but not to every tax lien. A discharge is specific to which property is affected. Once a tax debt is satisfied, the IRS grants a tax lien discharge if it accepts your request for discharge. The IRS will issue you a Certificate of Discharge which will allow you to sell, refinance or “retrieve” the property that had the tax lien attached to it.  

Anyone wishing to sell or refinance a real estate property with a tax lien attached to it should apply for a Tax Lien Discharge. Otherwise, you will have difficulty in selling or refinancing the property since the tax lien remains with the property until it is discharged. Although the new owners would not be subject to paying the tax debt, the IRS would still be able to place a lien against the property and seize it. Most potential buyers would not want this liability and so the tax lien would likely discourage any buyers. 

Applying for a tax lien discharge requires completing forms regarding the appraised value of the property, its description and the basis for a discharge. The IRS must be satisfied that granting the tax lien discharge would not jeopardize their interest in the property. In other words, the IRS would still be paid the amount owed without the use of a tax lien. The IRS would consider the following in granting a tax lien discharge:

• Proof that the value of the property is worthless to the IRS. For example, you owe more on the property than an appraisal states that it is worth.
• You have other valuable assets attached to the tax lien.
• You can sell the property and provide the proceeds to the IRS.
• You can pay the IRS an amount equal to the interest they have on the property.

Once the IRS approves your application for a tax lien discharge, they will send you a Certificate of Discharge for that property. You can then:

• List the property for sale without the liability of a tax lien attached to the property.
• Refinance the property and use the money to pay toward your tax debt.
• Sell the property outright and use the proceeds to pay the tax debt in full.

However: 

• You would still owe any remaining tax debt along with penalties and interest.
• The discharge only applies to the specific property named on the Certificate of Discharge.
• Any other property attached to the tax lien would remain attached and subject to levy if the tax debt is not paid in full.

Since this process is complicated and any mistakes may make the situation worse, it is advised to consult a tax professional. Call us today so that we can determine your best options. More tax resolutions will be discussed in the coming blogs, so please visit us again.