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Strategies for Reducing the Impact of a Federal Tax Lien

Strategies for Reducing the Impact of a Federal Tax Lien

An IRS tax lien can hurt your credit, cause financial problems, and encumber all of your personal and business property. Fortunately, there are many different ways to eliminate the lien or reduce the lien’s impact.

Pay Off Your Tax Debt

If you pay off your tax debt in full, the IRS will release the lien within 30 days. You can pay off your balance in a lump sum, but installment agreements or Offers in Compromise may also be used.

If you can’t pay your tax debt off yet, but need to get around the lien, you have a few other options.

Lien Subordination

A lien subordination is often used when you want to refinance your home or get a home equity loan. Normally, the new lender would have a lower priority than the IRS lien interest. A new creditor generally won’t agree to this arrangement, so you may have to ask the IRS to subordinate their lien interest.

A subordination is an agreement by the IRS to give up their spot in line to another creditor. The IRS lien remains in effect, but has a lower priority than your new creditor.

Lien Discharge

One situation where a subordination won’t work is when you are selling your home. The buyer is going to want the home to be free and clear of any liens, so you’ll need to request a lien discharge, which totally removes the IRS lien from a specific piece of property.

You’ll generally need to compensate the IRS for giving up their lien interest. If you have a lot of other valuable property for the lien to attach to, the IRS may feel comfortable discharging the lien from one asset. Otherwise, you might need to pay the IRS a lump sum equal to the lien interest they are sacrificing.

Lien Withdrawal

A lien withdrawal totally removes the tax lien from the public records. The IRS may do this if the lien was filed improperly, if it facilitates collection of the tax, or if you’ve entered into certain types of installment agreements.

Contact a tax attorney to determine the best way for you to reduce the impact of an IRS tax lien.

The Gartzman Law Firm can help you with federal tax liens and other IRS tax problems. Use our contact form to request a consultation with an Atlanta tax resolution attorney.