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A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets. A federal tax lien exists after the IRS:
- Assesses your liability;
- Sends you a bill that explains how much you owe (Notice and Demand for Payment); and
- You neglect or refuse to fully pay the debt in time.
The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property.
How to Get Rid of a Lien? According to the IRS - paying your tax debt - in full - is the best way to get rid of a federal tax lien. The IRS releases your lien within 30 days after you have paid your tax debt.
Options: When conditions are in the best interest of both the government and the taxpayer, other options for reducing the impact of a lien exist.
-- Discharge of property — Allows property to be sold free of the lien. The seller or buyer can submit Publication 783, Instructions on How to Apply for Certificate of Discharge From Federal Tax Lien - http://www.irs.gov/pub/irs-pdf/p783.pdf
-- Subordination — Does not remove the lien, but allows other creditors to move ahead of the IRS, which may make it easier to get a loan or mortgage. For more information review Publication 784, Instructions on How to Apply for a Certificate of Subordination of Federal Tax Lien - http://www.irs.gov/pub/irs-pdf/p784.pdf
-- Withdrawal — Removes the public notice and assures that the IRS is not competing with other creditors for your property. If applying for a withdrawal, use Form
12277, Application for the Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien - http://www.irs.gov/pub/irs-pdf/f12277.pdf
In additional - please be aware that the IRS may collect the tax liability
only within ten years after assessment
(statute of limitation
) - that means - if not paid - the lien will be removed after 10 years.
Even after the IRS releases the lien, it will be on the credit report as "released" for seven years.
Let me know if you need any help.