Some people may get chills on their spines just by pronouncing the words tax liens. It’s one of the darkest scenarios that can happen when you don’t pay your debt in time. In case you were never in such a situation, you might be asking yourself “What is a tax lien?”
What are Tax Liens?
Let’s illustrate this: you have a debt to pay, but you either fail or forsake doing so. If this happens, the IRS will place a lien on your property. In other words, the property is no longer yours – it’s the IRS’s until you pay back the money you own. If you need to simply contract this definition, a tax lien is an IRS payoff request.
Certainly, when someone gets a notice of federal tax lien, they immediately think of ways to get a federal tax lien release. Let’s see what options you have to do that.
Tax liens degenerate from carelessness; they’re the direct consequence of more than one mistake made in respect with paying off the amount of the debt one owns, be it in income or property taxes. A debt must not be taken for granted, and the prospect of having a lien imposed on your property reinforces that idea. But let’s set these inquiries aside for a moment and see what are some of the things you could do to remove federal tax liens.
How to Remove Tax Liens
Paying the debt
As with any other type of IRS method of making you return the money you owe, paying off that certain amount can get you out of trouble. The liens are typically abrogated within 30 days from the moment you’ve paid your debt. If you’re in a position where paying the debt in full is out of the question, then you must rely on something else. When there’s a common ground between you, as taxpayer, and the government (i.e. something can be worked out to benefit both parties), there are some alternatives you can try out.
Lien discharge
Yes, a lien can be discharged. Actually, there are no less than three distinct types of discharge: by forgiveness, by expiration and by payment. The former occurs when the IRS simply forgives your debt (it happens very rarely, but it’s nonetheless an alternative), the second occurs when the IRS fails at renewing the lien and the third, of course, happens when you make the payment. There is one more type of discharge that you could take your chances with:
Property discharge
It’s quite difficult to sell a part of your property while under a lien, but sometimes the IRS allows you to do that. The lien will automatically be discharged from the assets you manage to sell. In order to do that, you will need to make an agreement with the IRS first.
Subordination agreement
When you make a subordination agreement, it may become easier for you to get a new loan. It’s fundamentally a refinancing technique that you can use to pay your debt.
Tax lien withdrawal
This can happen in a variety of circumstances: when the federal tax lien was filed by the IRS prematurely, when you managed to have them accept an installment agreement or when a withdrawal would benefit both parties because the indebted taxpayer will find it easier to pay off the debt.
Do Tax Liens Affect Your Credit Score?
Yes, they do. As if it weren’t enough, a lien is not removed from your credit record even when you pay off the debt you owe. This is why you might need to fill in an IRS form to remove tax lien from your record. This is known as the IRS Form 12277. However, the process can be really thorough, and it can take up to 45 days to have the IRS contact the court where the lien was filed. You will get the copy of the document that the IRS notified the court to wipe the lien out of your credit report.
You must take all the necessary steps to remove this black stain from your report as fast as you’ve paid off your debt or settled on any of the alternatives above, since the lien will make your credit score plummet to the ground. Needless to say, it will affect your ability to get a loan – lenders are not that keen on borrowing money to people who’ve had financial issues in the past, especially something as serious as a lien.
Sometimes, your first attempt at having the IRS remove it from your credit report may be unsuccessful. Don’t despair. Fill out another form and send it back until they finally get the job done. You don’t have to go to credit repair agencies because the IRS should automatically remove it from your credit report once the lien has been withdrawn or released.
