When you have not paid your tax bill, then the IRS will file a Notice of Federal Tax Lien, which alerts all creditors their claim on your property. A tax lien is an official, legal claim by the IRS on your property that places them as the priority collector among any other collectors, including the bank or lender who holds your mortgage. A lien can be implemented on any property or assets, including bank accounts, automobiles, real estate property, or personal property. It affects your ability to refinance or sell the assets under the lien. There are several ways to remove a tax lien before it causes you more financial trouble.
Pay off Your Tax Debt
The best way to remove a tax lien is to simply pay off your tax debt in full. Once the IRS has payment for your full tax liability, including any penalties and interest, then they will remove the lien within 30 days. If you are unable to pay the full amount, you should look into taking out a loan from your bank or other lending instigation or using a credit card. These lines of credit typically have a lower interest rate and fewer penalties than the IRS.
Negotiate with the IRS
If your tax liability is so high that you cannot afford to pay it off and you are unable or unwilling to get the funds from another source, you can negotiate with the IRS. They have programs, including Currently Not Collectible, Offer in Compromise, and Installment Agreements, that provide you with alternative ways to pay back your federal tax debt. When you apply for these programs, you should use the assistance of a tax professional to reduce the risk of any errors in your application that can lead to its being denied. Once you have handled your debt through one of these alternative tax relief solutions, your tax lien will be removed.
File for Removal
There are a few options for filing to have the lien removed, even if you do not pay off or negotiate payments for your tax debt. You can apply for a Discharge of Property, which removes the lien from a specific property. This does not mean that all your property is safe, but it can help if you need one property free of the lien. You can also apply for Subordination, which allows other creditors to become the priority and help you to secure a loan or mortgage. The final option is to file for a Withdrawal. This removes the public Notice of Federal Tax Lien, which means that the IRS no longer will compete with your other creditors for the property even though you remain liable for your entire tax debt. All of these options have specific requirements and eligibility that you must meet in order to get the lien removed.
Working with a tax professional can help you to determine the best course of action to get your tax lien removed. You want to act as soon as you receive notice from the IRS, as having a tax lien can harm your credit and make it difficult to secure loans in the future.