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How To Avoid An IRS Lien Without Paying Your Full Balance Off



VENAR AYAR on IRS Lien

You can get around an IRS lien by requesting a withdrawal, discharge, or subordination.  Each of these strategies can be useful in different situations, depending on the reason you are trying to avoid the lien.

Lien Withdrawals

A lien withdrawal removes the Notice of Federal Tax Lien from the public records.  This could allow you to get a loan more easily or sell your property.

The IRS lists four reasons that it will consider a lien withdrawal request:

  • The lien was filed prematurely in error
  • Withdrawal will facilitate collection of the tax liability
  • Withdrawal is in the best interest of the taxpayer and the government
  • The taxpayer enters into a Direct Debit installment agreement and meets certain other conditions, or the installment agreement does not permit the filing of a tax lien

A lien withdrawal is the broadest type of relief because it removes the lien entirely from public record.

Lien Discharge

A lien discharge only removes the tax lien from one specific piece of property.  If you are trying to sell a major asset such as your home,  a lien discharge may be your best option.

The IRS will only grant a lien discharge when you make it worth their while, or if you have so much other property that the lien encumbers that the IRS can still feel secure.

Lien Subordination

A subordination is the narrowest type of lien relief.  The lien removes in place, but takes a lower priority position.  The higher priority position is given to another creditor, such as a bank that is giving you a loan for a second mortgage.

Once again, the IRS will want to be compensated in return for granting relief from the lien.  You may be required to pay the IRS an amount equal to the lien interest it is giving up.  However, if you owe a significant amount in back taxes, it may be easier to pay this amount than to pay off your full tax liability.

Executive Summary:
  • You can eliminate a tax lien by requesting a lien withdrawal, a lien discharge or lien subordination
  • Lien Withdrawals
    • Removes the Notice of Federal Tax Lien from public record
    • Four reasons IRS will consider lien withdrawal request:
      • lien was filed prematurely or in error
      • withdrawal will facilitate collection of tax liability
      • withdrawal is in the best interest of the taxpayer and the government
      • the taxpayer enters into Direct Debit installment agreement and meets certain other conditions, or the installment agreement does not permit the filing of a tax lien
    • Broadest type of relief – removes lien entirely from public record
  • Lien Discharge
    • Only removes tax lien from one specific piece of property
    • IRS will only grant lien discharge when you make it worth their while or
    • if you have so much other property that the lien encumbers that the IRS can still feel secure
  • Lien Subordination
    • Narrowest type of lien relief
    • Lien remains in place, but takes a lower priority position
      • Higher priority position is given to another creditor (e.g. a bank that is giving you a loan for a second mortgage)
    • IRS will want to be compensated in return for granting relief from lien
      • May be required to pay the IRS an amount equal to the lien interest it is giving up

Have a question? Contact Venar Ayar.

 

Venar Ayar

Venar Ayar

Ayar Law’s expertise is not only in dealing with the tax code, but in favorably resolving Federal and State tax problems. We know the procedural rules inside and out, and we know how things actually work at the IRS. Feel free to call or email Venar Ayar anytime (no charge) and he’ll be happy to answer any tax law questions you might have. 248.262.3400