Tax Liens

The IRS’s lien powers are extraordinary in their scope. Federal law gives the IRS the power to place a lien on any personal or real property someone owns, and that lien exists from the
moment the IRS determines that a balance is owed. The process of assessing a tax liability takes place after notices are sent to you, and a tax lien applies to anything you own at the time of the assessment as well as to anything you acquire in the future, until the lien is released, withdrawn, or discharged. Which lien action is the best route to pursue depends on your situation; lien withdrawal, discharge, and subordination are all slightly different ways to reach slightly different goals. Tax liens are filed by the IRS and recorded in the county where the taxpayer resides. Tax liens can prevent the sale of property unless and until they are satisfied or expire.

Lien withdrawal

Under certain circumstances, the IRS may withdraw a tax lien. Withdrawal of a tax lien removes the effect of the lien. This is not the same as a release of the lien. A lien withdrawal will often be granted in connection with an installment agreement, but is sometimes granted if the Notice of Federal Tax Lien itself was filed prematurely or inadvertently. A withdrawal of a tax lien does not necessarily mean you don’t still owe the underlying taxes.

Lien Discharge

A Tax lien discharge removes the lien from certain property. A proper application must be made to the IRS to get a lien discharge for specific property. This may be a good strategy to employ if the taxpayer wants to sell a certain piece of property and there is enough remaining property to secure the amount of taxes owed.

Lien Subordination

When a tax lien is subordinated, the IRS allows another creditor to be placed ahead of it in priority of debts. For example, if a taxpayer wants to refinance a piece of real estate, the IRS might approve a lien subordination so the new mortgage would can have higher priority that the tax lien that already exists. Normally, the tax lien would have higher priority and the mortgage company would most likely not agree to make the new loan if it will end up with lower priority than the tax lien.

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