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USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1237
Experience:  US Taxation specialist.
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How can a $90,000 a federal tax lein that's recorded get removed.

Customer Question

How can a $90,000 a federal tax lein that's recorded get removed. I have no assetts. I want to declare chapter 7 bankruptcy. If I have no assetts prior to the bankruptcy how can I get IRS to remove it? It's for real estate capital gains in 2005 and 2006. The IRS files a lein in 2008. The homes were sold under a year. They appear to have a profit but the IRS doesn't know about the losses. If I do a chapter 7 will the IRS be able to take any future assets (purchased after chaper 7)?
Also, I don't know how to begin to amend this. I also had 3 foreclosures on other homes different homes that are not part of this capital gain lein.
Submitted: 2 years ago.
Category: Tax
Expert:  USTaxAdvising replied 2 years ago.


Sorry to hear of your situation. See my answers below to your questions.

If I have no assets prior to the bankruptcy how can I get IRS to remove it? - There appears to be only two options to having the lien removed prior to bankruptcy. See the information below to see if you qualify for either.

1 - Discharge of property: A "discharge" removes the lien from specific property. There are several Internal Revenue Code (IRC) provisions that determine eligibility. For more information, refer to Publication 783, Instructions on How to Apply for Certificate of Discharge From Federal Tax Lien (PDF) and the video Selling or Refinancing when there is an IRS Lien.

2 - Withdrawal: A "withdrawal" removes the public Notice of Federal Tax Lien and assures that the IRS is not competing with other creditors for your property; however, you are still liable for the amount due. For eligibility, refer to Form 12277, Application for the Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien (Internal Revenue Code Section 6323(j)) (PDF) and the video Lien Notice Withdrawal.


If I do a chapter 7 will the IRS be able to take any future assets (purchased after chapter 7)? - Basically yes, tax liens continue in effect after a Chapter 7 filing until they are paid off or otherwise released.Unfortunately, tax liens usually are not paid in Chapter 7 cases. Most Chapter 7 cases are "no asset" cases. In a no asset case, creditors receive nothing because there is no property that the trustee can sell for the benefit of the bankruptcy estate after taking into account secured claims (like mortgages and tax liens) and exemptions. Ordinarily, trustees will not attempt to sell property if all of the proceeds would have to be paid to secured creditors or the debtor.

Example. Let's take the example of a house worth $200,000, with a $150,000 mortgage, a $25,000 federal tax lien, and a $100,000 homestead exemption. In most cases, the trustee would not try to sell the house, because there would be no proceeds available to pay other creditors after taking into account the mortgage, tax lien, and homestead exemption.

In this situation, the tax lien would still remain on your property after your Chapter 7 case is over. In order to get rid of the lien, you could sell the property and pay the IRS from the proceeds. Or, you could attempt to work out a payment plan with the IRS to pay the balance due and have the tax lien released. Simply filing Chapter 7, however, would not make the lien disappear.

I hope this provides the clarity you were looking for. As I see it you only have two options to have the liens removed completely from your property. (1) Discharge of property and (2) Withdrawal.

Best regards,

Customer: replied 2 years ago.

Hi but I don't own a house. I rent. I have $0 assetts. The IRS filed the federal tax lein in 2008 but there are not any assetts tied to it. is it possible to get the 2008 FTL removed and how?