There is one more method of negating a tax lien against a property. A Tax Lien Withdrawal removes the Public Notice of Federal Tax Lien from an asset. This makes it easier to sell or refinance a property or asset. Remember that the Internal Revenue Service (IRS) places a tax lien on property and/or assets when you fail to pay your taxes. This means that you cannot refinance or sell the property to which a tax lien has been attached. The IRS can place a tax lien on personal property for a tax debt owed by your business. Attaching a tax lien to personal property is one tool the IRS uses to impose a Trust Fund Recovery Penalty and collect a tax debt. However, if you enter into a direct debit installment agreement with the IRS regarding this tax debt, you may be eligible for a Tax Lien Withdrawal.
There are two options for eligibility for a Tax Lien Withdrawal:
For Option 1: The lien has been paid off and the property released from the tax lien so that the IRS is no longer prioritized regarding it. Criteria is as follows:
- All tax returns for the past three years have been filed including individual, business and information returns.
- All estimated tax payments and deposits are current.
- Your tax liability has been released.
For Option 2: Direct debit installment agreement allows for the filing of a tax lien withdrawal. This includes converting a regular installment agreement into a direct debt installment agreement in which installment payments are directly paid from your bank account. Criteria is as follows:
- Qualifying taxpayer: individual, business with income tax liability only and/or out of business entities with any type of tax debt. The IRS can place a tax lien on your business.
- A tax debt of $25,000 or less is owed. If more than $25,000 is owed, a taxpayer may pay the amount down to $25,000 before requesting a Tax Lien Withdrawal.
- Other filing and payment requirements are in full compliance.
- Three consecutive direct debit payments have already been made.
- There has been no default on current or previous Direct Deposit Installment Agreements.
- The Direct Debit Installment Agreement must be paid in full within 60 months or before the collection statute expires, whichever is earlier.
There are other considerations for eligibility for a tax lien withdrawal:
- The tax debt is less than $25,000.
- Withdrawal of the tax lien is in the best interest of the government and the taxpayer.
- It would be easier to repay the tax debt is the tax lien was withdrawn.
- The taxpayer enters into an installment agreement to pay off the past due tax lien.
- Evidence exists that the tax lien was not in accordance with IRS procedures or was filed prematurely.
The most important eligibility requirement for any Tax lien Withdrawal is entering into a Direct Debit Installment Agreement since installment payments are paid directly from your bank account. You can simply set this up online through the IRS website. You must also provide documentation to support your application for a tax lien withdrawal. Furthermore, you must list the financial institutions you would like notified of the withdrawal of the tax lien.
Applying for a tax lien withdrawal may be the best option for you if are wanting to sell your property and there is a public notice of federal tax lien on your assets, which renders them undesirable to buyers or creditors. Give us a call today to consult with a tax professional about your situation as to whether a Tax Lien Withdrawal is advantageous for you.