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Some Options For Dealing With Federal Tax Liens

It is important that taxpayers negotiate with the IRS to pay any delinquent tax debt, preferably before the IRS places a lien on property or worse, seizes it pursuant to its statutory authority to levy property. The attorneys at Loan Lawyers may help any taxpayer negotiate a settlement with the IRS of any delinquent tax debt, whether or not the IRS has taken action in the form of encumbering or levying real and personal property assets.

When conditions are in the best interest of both the government and the taxpayer, there are alternatives for reducing the impact of a federal tax lien. In certain circumstances, a federal tax lien may be discharged, subordinated, or withdrawn.

A taxpayer may desire to sell property encumbered by an IRS lien. A "discharge" removes the lien from the specified property while leaving it in place for other assets. To obtain a discharge, a taxpayer must apply for a "Certificate of Discharge" and provide detailed information regarding the property, sale, lender and tax lien. The taxpayer must include two appraisals of the encumbered property with the application for a certificate of discharge.

If the IRS determines discharge of the property facilitates collection and, therefore, is in its best interest, it will agree to discharge of the property from the federal tax lien. Because there are several Internal Revenue Code provisions regarding eligibility for a certificate of discharge, taxpayers should enlist the assistance of an experienced debt resolution attorney when applying for such.

"Subordination" of a federal tax lien does not remove it but "de-prioritizes" it for payment. An example of this is when a taxpayer may want to refinance real property such as a personal residence which is encumbered by a federal tax lien. The IRS may permit refinancing while subordinating the lien, thus allowing the lender's security interest to have priority over the federal tax lien. Subordination, in this case, allows taxpayers to retain equity in their homes while lowering their mortgage payment. Subordinating a lien facilitates collection because it theoretically may allow a taxpayer to have an increased ability to pay the delinquent tax debt.

A "withdrawal" of a federal tax lien removes the public Notice of Federal Tax Lien and has the legal effect as if the Notice was never filed. Nonetheless, a taxpayer is still liable for the amount of his or her tax debt.

There are two additional options regarding withdrawal. The first option allows withdrawal of a Notice of Federal Tax Lien after the lien’s release. General eligibility includes the satisfaction and release of the tax lien, as well as compliance in filing all individual, business, and information returns for the prior three years. A taxpayer must also be current on any estimated tax payments or federal tax deposits for the IRS to withdraw a tax lien.

The second option is only available for debts of $25,000 or less. It allows withdrawal of a Notice of Federal Tax Lien if a taxpayer has entered into or converted a regular installment agreement to a Direct Debit installment agreement. As usual, taxpayers must be in full compliance with all other filing and payment requirements.

At Loan Lawyers, our South Florida consumer rights and debt defense attorneys may help individuals negotiate a settlement of tax debts and help with the discharge, subordination, or withdrawal of any federal tax liens. To schedule a free consultation at any of our three conveniently located offices, contact Loan Lawyers today by calling (888) FIGHT-13 (344-4813).
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