Tax Lien Attorney
Remove the Lien. Restore Your Credit.

Federal Tax Liens: What They Are and How to Get Rid of Them

A federal tax lien is the government's legal claim against your property when you owe back taxes. Unlike a levy, which physically takes your property or money, a lien is a claim that attaches to all of your current and future assets: your home, your car, your bank accounts, your business property, and even your accounts receivable.

The IRS files a Notice of Federal Tax Lien (NFTL) in the county where you live or own property. This public filing alerts creditors that the IRS has a priority claim on your assets. It shows up on your credit report and can drop your credit score by 100 points or more. It makes selling property, refinancing a mortgage, or obtaining new credit extremely difficult.

The IRS generally files a lien when you owe more than $10,000 and have not responded to its demand for payment. Under the Fresh Start program, the IRS raised this threshold from $5,000, but liens are still filed on a majority of significant tax debts.

Lien Release vs. Withdrawal vs. Subordination vs. Discharge

There are four distinct ways to address a federal tax lien, and understanding the difference is critical to choosing the right strategy:

• Lien release: The IRS is required to release a lien within 30 days after the tax debt is fully paid, the statute of limitations expires, or the IRS accepts a bond guaranteeing payment. A release removes the lien but does not undo the credit damage. The lien remains on your credit report as a released lien.
• Lien withdrawal: A withdrawal removes the NFTL entirely, as if it had never been filed. This is far better for your credit than a release because it eliminates the public record. Under the Fresh Start program, the IRS will withdraw a lien if you owe $25,000 or less and enter into a Direct Debit Installment Agreement. We pursue withdrawal whenever possible.
• Lien subordination: Subordination does not remove the lien but changes its priority, allowing another creditor to move ahead of the IRS. This is useful when you need to refinance a mortgage or obtain a business loan — the new lender needs priority over the IRS lien. We file Form 14134 to request subordination.
• Lien discharge: A discharge removes the lien from a specific piece of property, such as a home you are selling. The lien remains on your other assets. This is commonly used when you need to sell property and the sale proceeds will not fully satisfy the tax debt. We file Form 14135 to request discharge.

Impact on Credit and Financial Transactions

The credit impact of a federal tax lien is severe. While the three major credit bureaus stopped including tax liens in credit reports in 2018, many lenders still check public records independently. A tax lien on public record can result in loan denials, higher interest rates, and difficulty renting property.

More practically, a tax lien creates problems every time you try to conduct a significant financial transaction. Selling a home requires dealing with the IRS's lien interest. Refinancing a mortgage requires either paying off the lien or obtaining subordination. Starting a new business may be difficult when lenders see an outstanding federal tax lien.

The IRS Lien Withdrawal Process

Under the Fresh Start initiative, the IRS expanded its criteria for lien withdrawal. You may qualify for withdrawal if you owe $25,000 or less (including penalties and interest) and enter into a Direct Debit Installment Agreement (DDIA). After making three consecutive on-time payments, you can request withdrawal using Form 12277.

For taxpayers who owe more than $25,000, the IRS considers withdrawal requests on a case-by-case basis. We have successfully obtained lien withdrawals for larger debts by demonstrating that withdrawal will facilitate collection of the tax — for example, by showing that the lien is preventing you from refinancing a mortgage that would free up cash to pay the debt.

Property Sales with an Outstanding Lien

If you need to sell your home or other property while a federal tax lien is in place, you generally need to address the lien before closing. The title company will flag the lien, and most buyers will not proceed until it is resolved. You have several options:

• Pay the full tax debt from sale proceeds at closing
• Obtain a lien discharge if the sale proceeds are insufficient to pay the full debt
• Negotiate with the IRS to accept partial payment from proceeds and release the lien

We handle all IRS communication and documentation for property sales, ensuring that closing proceeds smoothly and that you get the best possible outcome from the sale.