The easiest and fastest way to get a tax lien released is to pay the tax debt in full. Once the tax debt is paid in full, the tax lien will be released within 30 days.
However, the IRS does allow other options for a taxpayer to have a lien subordinated, removed or released, if conditions exist that are in the best interests of both the government and the taxpayer.
Discharge from the Federal Tax Lien
A Certificate of Discharge removes the tax lien from a specific property. To request a Certificate of Discharge, a taxpayer has to submit an Application for Certificate of Discharge from Federal Tax Lien. The IRS will generally discharge the lien from a specific property immediately prior to the real property being sold, (regardless of the amount the IRS receives) so that the new buyer will have clear title. However, keep in mind that if there is an existing tax debt, the tax lien remain against other real and personal property.
Subordination of Federal Tax Lien
A Certificate of Subordination does not remove the tax lien from a specific property, but permits other creditors to move ahead of the IRS. This generally happens in a situation of a refinance. The first mortgage lender will be paid in full, the second mortgage lender will move up to first position. To request a Certificate of Subordination, the taxpayer has to submit an Application for Certificate of Subordination from Federal Tax Lien. The IRS will generally subordinate the lien prior to the close of the refinance. However, if the refinance results in the taxpayer receiving some proceeds, the IRS will want the proceeds in exchange for subordinating the tax lien.
Withdrawal of Federal Tax Lien
A withdrawal of a federal tax lien removes the public notice as if the public notice of the tax lien was never filed. By withdrawing the tax lien, the IRS loses its position in line against other creditors even though the taxpayer may have an existing tax debt. To request the withdrawal of the lien, the taxpayer has to submit an Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien.
A taxpayer can request a lien withdrawal if
Option 1:
- The tax liability has been satisfied and the tax lien has been released
- Taxpayer has a good history of filing compliance going back 3 tax years, and
- Taxpayer is current on his/her estimated tax payments and federal tax deposits, if applicable.
Or Option 2:
- Taxpayer is in a direct debit installment agreement
- The outstanding balance due is below $25,000
- The outstanding balance due (below $25,000) is full paid within 60 months or within the Collection Expiration Statute Date, which is earlier,
- Taxpayer is full compliance with filing and payments
- At least 3 monthly payments were made via direct debit
- Taxpayer cannot default the existing agreement and has never defaulted in the past.
