The IRS prefers Direct Debit Installment Agreements (DDIA) to payment by check or other methods. Payments occur automatically, so the taxpayer doesn’t need to remember to send a payment each month, which reduces the risk of default.
To encourage taxpayers to use direct debit as their method of payment, the IRS offers several benefits for DDIAs:
- Lower setup fees are charged.
- You can avoid submitting a Collection Information Statement if you owe between $25,000 and $50,000.
- Unlike payment by credit card, no fees are charged per payment.
If you have an existing installment agreement that you’d like to convert to a DDIA, you may also be able to request a withdrawal of the IRS Notice of Federal Tax Lien (NFTL).
Tax Lien Withdrawals
Normally, the IRS only withdrawals the NFTL from the public records if one of the following circumstances exist:
- The NFTL was filed prematurely or improperly.
- Withdrawal will facilitate collection of the tax.
- Withdrawal is in the best interest of the taxpayer and the government.
However, you may also request a withdrawal of the NFTL if you have a DDIA or if you convert your installment agreement to a DDIA.
To qualify, you must meet the following conditions:
- You have only income tax liability or you are an out-of-business entity with any type of tax debt.
- You have paid down your balance to $25,000 or less.
- Your DDIA pays your full balance within 60 months or by the collections statute expiration date, whichever comes first.
- You have made at least three straight direct debit payments.
- You are in full tax compliance and have never defaulted on a DDIA.
Once the NFTL is withdrawn from the public records, it may make it easier to get a loan, refinance your mortgage, or sell your home.
Other Tax Lien Avoidance Strategies
Converting to a DDIA can be a great option for getting a tax lien withdrawal. If you can’t convert to a DDIA or aren’t eligible for the lien withdrawal, you do have other options.
You can request a tax lien subordination that allows you to refinance your mortgage or get a home equity loan. You can also request a tax lien discharge that allows you to sell your home.
In either case, you’ll need to apply for a Certificate of Subordination or a Certificate of Discharge from the IRS and meet certain requirements. You may need to pay the IRS an amount equal to their interest in some cases.
Contact a tax attorney if you need help negotiating your installment agreement or getting around the IRS tax lien.
The Gartzman Law Firm offers tax settlement help for both federal and state tax debt. Use our contact form to request a consultation with an Atlanta tax resolution attorney.