IRS tax liens interfere with your ability to sell or borrow against your property. If you need to get around the tax lien, you have several options at your disposal.

First and foremost, you can eliminate the lien by paying your tax bill in full. However, this may be unrealistic if you owe $25,000, $50,000, or $100,000 to the IRS. In these cases, you’ll need to consider your other options.

Tax Lien Withdrawals

A lien withdrawal completely removes the tax lien from public records. The IRS will only agree to withdraw the lien in specific circumstances.

First, the IRS should withdraw the lien if it was filed prematurely or in violation of IRS procedures. This reason could apply if the IRS failed to send you the correct notices or made some type of clerical error.

The IRS may also withdraw a lien if it will facilitate collection of the tax or if it is in the best interests of the government and the taxpayer. These reasons are a bit more subjective, but they could apply if the lien withdrawal would allow you to pay more money towards your tax debt.

Finally, you can request a lien withdrawal if you have a Direct Debit Installment Agreement. You’ll need to pay your balance under $25,000 and meet other requirements before requesting the lien withdrawal.

Tax Lien Subordinations and Discharges

Lien subordinations and lien discharges only apply to a specific asset. The difference is that a lien discharge completely removes the lien from the asset, while a lien subordination remains in effect, but gives its priority position to another creditor.

A creditor’s priority interest in an asset—such as your home—is generally determined by the rule “first in time, first in right”. If the tax lien was filed before you try to get a home equity loan, your new lender would have a lower priority than the IRS. This could limit your ability to get a loan.

In a lien subordination, the IRS agrees to give its priority position to your new lender. The IRS lien will take the lower priority position.

If you want to sell an asset, you’ll likely need a lien discharge. In either case, you will have to pay the IRS an amount equal to the lien interest being sacrificed or meet other IRS conditions.

Have a question? Contact Venar Ayar.