Federal tax liens can hurt your ability to get credit or sell your home. When you already have delinquent IRS tax debt, the tax lien can put you in an even tougher financial situation.
Fortunately, there are many ways to get around the federal tax lien. Consider any of these strategies if you need to sell an asset, refinance, or get a loan.
Pay In Full
The simplest—but often hardest—strategy is to pay your tax debt in full. The IRS should release the lien within 30 days after your tax debt is paid off. However, the lien may hurt your credit, making it harder to get a loan to pay off your full balance.
Subordinate the Lien
Each security interest in an asset has its own spot in line. For example, your primary mortgage lender has the first spot in line and may be followed by the IRS tax lien.
A lien subordination is like giving up your spot in line. The IRS agrees to move back a spot, which allows a new lender to take its place.
You can get a lien subordination by paying the IRS an amount equal to the interest being given up.
Discharge the Lien
A lien discharge completely removes the federal tax lien from an asset. If you want to sell the asset, you’ll need to get a discharge instead of a subordination.
Like a subordination, a discharge requires you to pay off the IRS or otherwise make them feel secure about their interest in your property. If your remaining property is worth more than twice the lien amount (the amount you owe the IRS), the IRS may consider discharging the lien from one asset.
Direct Debit Installment Agreements
The IRS likes Direct Debit Installment Agreements (DDIA) because taxpayers don’t have to remember to send a check each month. Some taxpayers who use DDIAs may also qualify to request a lien withdrawal.
If you owe over $25,000, you’ll have to pay your balance down below this amount first. You also have to meet certain other conditions, such as making at least three consecutive direct debit payments.
Challenge the Lien
Sometimes the IRS gets overzealous when filing a lien. For example, they may file the lien before sending the required notices to the taxpayers.
In these cases, you may request a lien withdrawal due to a procedural error or violation of IRS policy. Be prepared to offer some type of tax resolution because the IRS may decide to file a new, valid tax lien.
The Gartzman Law Firm can help you with tax liens and other IRS tax problems. Use our contact form to request a consultation with an Atlanta tax resolution attorney.