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Phillip B, EA
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 704
Experience:  Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
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I received a denial of withdrawal of Notice of Federal Tax

Customer Question

I received a denial of withdrawal of Notice of Federal Tax lien. The secured taxes were paid through a Chapter 13 bankruptcy and the lien was released last year. The denial letter says the provisions for withdrawal were not met, but no detail provided. Had requested a Fresh Start to have lien withdrawal in the best interest of taxpayer. What might we have done wrong, or should we appeal and on what basis?
Submitted: 2 years ago.
Category: Tax
Expert:  Phillip B, EA replied 2 years ago.
Thanks for requesting me. I will do my best to provide you with clear and concise answers to your tax question based on the information you have provided.
I wish I had better news.
If the taxes owed to the IRS were discharged in the bankruptcy but not paid in full, the IRS can maintain liens that were filed pre-bankruptcy petition. If this is the situation, you will be stuck waiting out the collection statute of limitations (10 years from the date the tax was assessed + extension during the bankruptcy) before the IRS will release that lien. You don't have to pay on the amount that was discharged, and the IRS will not pursue any other collections on that tax debt (no new liens, levies, or garnishments). However, the IRS can maintain the liens they already have.
There is not much that can be done at this point. If your financial picture is still on the poor side, you could pursue an offer in compromise or an installment agreement to pay off the amount that the IRS has secured with the remaining lien. I would check the IRS account transcripts to figure out when the 10 year collection statute of limitations expires. If you can, wait out the collections statute of limitations.
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Customer: replied 2 years ago.

I may not have been clear. No tax lien currently exists. The tax lien was released as the secured taxes were paid. I was requesting a withdrawal of the Notice so that it can be removed from our credit history - The Fresh Start provision.

Expert:  Phillip B, EA replied 2 years ago.
If all tax liens were released you will qualify for the fresh start notice of Federal tax lien withdrawal if :
1.) Your tax liability has been satisfied and your lien has been released; and also:
2. ) You are in compliance for the past three years in filing - all individual returns, business returns, and information returns; and
3.) You are current on your estimated tax payments and federal tax deposits, as applicable.
If you meet these requirements, I would guess that the IRS maybe interpreting having the debt discharged during bankruptcy as not satisfying the tax liability in requirement 1.
It may be a good idea to appeal the decision through the taxpayer advocate office. They usually are very helpful in resolving issues in the taxpayer's favor if possible -- as a professional I would take your case to them after having received the last denial letter if I was your representative. You can find the contact information for their local office from this website: