An IRS Tax Lien can have a devastating effect on your financial life. Your credit is ruined, and your assets are in constant danger of being seized the longer you wait to pay the IRS. So what should you do? There are three ways you may be able to remove your Tax Lien. No effort is guaranteed, but it doesn't hurt to try them.
1. Appeal the Lien Filing
The IRS has five business days after filing the lien to provide you with written notice. The written notice must include notice of the right to request a hearing within 30 days from the sixth day after the Lien filing. If you win the appeal, the lien will be withdrawn. However, the only way you can win an appeal against a lien is if they placed it on you before you were ever notified of the tax debt. If the IRS sent a letter stating that you owed more than $5,000 at any point before the lien was placed, then you don't stand a chance of appealing it. Also, remember, just because you never received a letter doesn't mean that they didn't send it. The IRS is notorious for having incorrect mailing addresses.
2. Request Partial Discharge
A tax lien uses everything you own and will own basically collateral on your tax debt. If you want to take out a mortgage on or sell your primary residence to pay off your tax debt, you can request that the lien be discharged from this property temporarily. You will need to send a detailed letter to the IRS. There is no preprinted form for you to fill out. IRS Publication 784, “Application for Subordination of Federal Tax Lien” lists all the information you will need to include in your letter.
3. Pay Off Your Tax Debt
This is the surest way to rid yourself of a lien. If you cannot pay it all in one lump sum, look into an installment agreement. This will help you eventually rid yourself of the tax lien. As an added bonus it will help you demonstrate your credit worthiness to lenders.
4. Avoid Bankruptcy
Contrary to popular belief, filing Bankruptcy will not wipe out a Tax Lien. If your Tax Debts qualify for a discharge under any type of bankruptcy, the Lien will remain. If you owned any property going into bankruptcy, the property is still subject to a Tax Lien. The IRS could seize the property after your bankruptcy is over.
Be careful when you perform any of the above tasks to get the IRS to release your Lien. You risk having your Lien remain until the statute of limitations expires if you make even a small mistake. You also greatly increase your chances of having the Lien removed if you file your back taxes.