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How to Avoid an IRS Lien Without Paying Your Full Balance Off

Avoiding an IRS tax lien without paying your full tax balance

You can get around an IRS lien by requesting a withdrawal, discharge, or subordination.  Each of these strategies can be useful in different situations, depending on the reason you are trying to avoid the lien.

Lien Withdrawals

A lien withdrawal removes the Notice of Federal Tax Lien from the public records.  This could allow you to get a loan more easily or sell your property.

The IRS lists four reasons that it will consider a lien withdrawal request:

  • The lien was filed prematurely in error
  • Withdrawal will facilitate collection of the tax liability
  • Withdrawal is in the best interest of the taxpayer and the government
  • The taxpayer enters into a Direct Debit installment agreement and meets certain other conditions, or the installment agreement does not permit the filing of a tax lien

A lien withdrawal is the broadest type of relief because it removes the lien entirely from public record.

Lien Discharge

A lien discharge only removes the tax lien from one specific piece of property.  If you are trying to sell a major asset such as your home,  a lien discharge may be your best option.

The IRS will only grant a lien discharge when you make it worth their while, or if you have so much other property that the lien encumbers that the IRS can still feel secure.

Lien Subordination

A subordination is the narrowest type of lien relief.  The lien removes in place, but takes a lower priority position.  The higher priority position is given to another creditor, such as a bank that is giving you a loan for a second mortgage.

Once again, the IRS will want to be compensated in return for granting relief from the lien.  You may be required to pay the IRS an amount equal to the lien interest it is giving up.  However, if you owe a significant amount in back taxes, it may be easier to pay this amount than to pay off your full tax liability.

Contact an Attorney

Tax liens are a pain, but there are several ways to avoid the problems caused by IRS liens.  Contact a tax attorney to discuss your goals and determine your best lien avoidance strategy.

Like the Ayar Law Facebook page to receive more tax resolution updates or call us at 800.571.7175 to get free, no-obligation legal advice about your tax matter.

Executive Summary:

  • You can eliminate a tax lien by requesting a lien withdrawal, a lien discharge or lien subordination
  • Lien Withdrawals
    • Removes the Notice of Federal Tax Lien from public record
    • Four reasons IRS will consider lien withdrawal request:
      • lien was filed prematurely or in error
      • withdrawal will facilitate collection of tax liability
      • withdrawal is in the best interest of the taxpayer and the government
      • the taxpayer enters into Direct Debit installment agreement and meets certain other conditions, or the installment agreement does not permit the filing of a tax lien
    • Broadest type of relief – removes lien entirely from public record
  • Lien Discharge
    • Only removes tax lien from one specific piece of property
    • IRS will only grant lien discharge when you make it worth their while or
    • if you have so much other property that the lien encumbers that the IRS can still feel secure
  • Lien Subordination
    • Narrowest type of lien relief
    • Lien remains in place, but takes a lower priority position
      • Higher priority position is given to another creditor (e.g. a bank that is giving you a loan for a second mortgage)
    • IRS will want to be compensated in return for granting relief from lien
      • May be required to pay the IRS an amount equal to the lien interest it is giving up
  • Contact an Attorney
    • Contact a tax attorney if you are facing an IRS lien
    • Ayar Law offers free, no-obligation tax advice at 800.571.7175

 

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.