What is the Difference Between Removing a Tax Lien and a Discharge of Property?

When you owe money to the IRS and do not pay, you will most likely end up with a tax lien on your property. This is an official notice that the IRS has priority over other creditors to your property, including your house, car, personal property, and other assets. This can make it difficult to obtain credit, including a mortgage or car loan. You do have options for removing your tax lien, and the IRS also has options to help you get the line of credit you need without removing your lien, including a Discharge of Property. This differs from a withdrawal or release of the lien, namely as it is a specific discharge to help you sell your property and pay off your tax debt.

What is the Discharge of Property?

A discharge of property only removes the lien from a specific asset or property, such as your house, car, or other property. The rest of your property and assets remain subject to the lien. This action usually allows you to sell the property in order to receive the funds to pay off your IRS tax debt. The IRS typically approves a discharge of property when it is in their best interest, especially if it allows you to pay off your tax debt.

How to Qualify for a Discharge of Property

To qualify for a discharge of property, you have to apply to the IRS using the appropriate form. Along with the form, you have to include a legal description of your property, a copy of the contract to sell the property, a copy of your tax lien, information about your lender, appraisals of the property, and more. It can be a complicated application process, so you should work in conjunction with a tax professional and/or an attorney to ensure you have all the proper documentation to complete the application and be approved for the discharge of property.

How Does That Differ from Removal or Release of a Tax Lien?

The biggest difference between a discharge of property and a withdrawal or release of the tax lien is that it only focuses on one property. This discharge is done in order to facilitate your ability to pay your tax liability in full, which they will release the tax lien on all the other property and assets you own. A tax lien will be released or removed from your property once you pay off your tax debt or negotiate for a tax relief settlement. However, it will remain in your credit history, which can affect your ability to be approved for credit in the future. You can apply for a withdrawal, which removes the public notice of the lien, in a variety of circumstances. Working with a tax professional will ensure you negotiate the right type of tax debt relief settlement that will help you to have a strong financial future.

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When you owe money on your federal taxes, one of the common collection actions taken is IRS tax garnishment, typically on your wages or salary. Wage garnishment can leave a person with very little money on which to live. 

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