Don’t be fooled by companies who make promises that sound too good to be true!

Many large companies that you have heard ads for – or who may be sending you threatening letters right now – prey on taxpayers with scare tactics by taking advantage of their lack of knowledge and understanding. You need to understand what a tax lien really is before you talk to them. Don’t rely on a sales person in a massive call center located half-way across the US to tell you what a tax lien means to you. Those companies care about one thing, making a sale at any cost, and they get that done by scaring you into a corner where you feel like you have no other option.

Tax Lien Negotiations

Tax liens are a normal course of business for the IRS when you owe taxes for an extended period of time. Liens are filed to protect the interest of the government. They negatively affect your ability to borrow money or sell property. Unless you qualify for a streamline agreement, or owe under $10,000, a tax lien will be filed and will only be released in a handful of circumstances. Many companies buy lists of tax liens that are filed because a lien is the only matter of public record that you have some issue with the IRS or state authorities. They use these lists to contact potential clients, and often are misleading about what a tax lien means in order to win over business.

Common Misconceptions about Tax Liens:

  • A tax lien does NOT mean that you are necessarily in danger of collection actions.
  • A tax lien is NOT an indication that a company hasn’t resolved your account.
  • A tax lien does NOT mean that the IRS can seize your property or assets.
  • If you are in an agreement, most companies CANNOT release the lien without putting you into a resolution that is less beneficial for you (such as a much higher payment plan.)

Truths about Tax Liens:

  • A tax lien is NOT an indication of if you are in danger of collections. If you are put into a partial pay installment agreement or a currently non-collectable status, then a lien will be filed even though you are in absolutely no danger of enforced collections.
  • A tax lien is often filed AFTER a resolution is complete, and your account is resolved.
  • A tax lien does NOT give the IRS the right to take your property. It DOES however affect the sale of property and assets. The IRS has first right to any proceeds AFTER the primary mortgage holder is paid. In other words, if you sell a property for $100,000 and owe $60,000 to the bank for a mortgage, the IRS will expect the other $40,000 and may be able to get these funds before they are disbursed to you.
  • There are only a small handful of reasons why a lien will be released, and it may require a potentially less beneficial solution if it is important to you not to have a lien filed.

When will the IRS release a Tax Lien?

It is important to know that there are two primary types of lien releases; Withdrawals and Subordinations. A withdrawal is where the lien is removed completely (but it still may appear on your credit report as “satisfied”). Subordination is where the lien stays in place, but the IRS puts another institution before them in the order of who will get paid when an asset is sold. These are the situations where you can get a lien withdrawn or subordinated according to the IRS.

1. The lien was filed prematurely or not in accordance with IRS procedures.

    • This very rarely happens except in a small percentage of cases.

2. The taxpayer entered into an installment agreement to satisfy the liability for which the lien was not required to be filed, but the lien was filed anyway.

    • This is if they file a lien AFTER you set up a payment plan, AND the lien was not required to be filed under the terms of the agreement. This applies to balances UNDER $50,000 paid within 6 years (72 months) AND it is paid by direct debit from a checking or savings account..

3. The taxpayer is under a Direct Debit Installment Agreement, and meets the criteria for the streamline program.

    • You can get a lien release on balances UNDER $25,000 if you set up an agreement that full pays in 6 years (72 months) AND it is paid by direct debit from a checking or savings account. To qualify for the release, the taxpayer must first make three consecutive direct debit payments.

4. Withdrawal will facilitate collection of the tax.

    • For instance, if you are selling a property, it is required to get the lien withdrawn before closing, and the proceeds will go to the IRS once sold.

5. The withdrawal is in the best interest of the taxpayer and the government.

    • If your job requires you to not have liens, and it would affect your ability to pay on an agreement to the IRS, they will release the lien after thorough investigation.

6. The IRS will receive an amount equal to the lien or interest to which the certificate of subordination is issued.

    • This applies when you are getting a loan to pay the IRS, and the bank requires collateral in the form of property or assets. They will subordinate the lien to the bank you are getting a loan in the amount of the payment that they receive. If you sell this asset, then the money would be paid to the primary mortgage holder, then bank used to get the loan to pay the IRS, and lastly the IRS.

7. The issuance of the certificate of subordination will increase the government’s interest and make collection of the tax liability easier.

    • The IRS leaves this option open to any other reasonable alternative. However, very few alternatives will actually be accepted.