Source: http://www.bsujhtax.com/Home/liens
Timestamp: 2020-01-26 09:52:42
Document Index: 227039415

Matched Legal Cases: ['§ 6320', '§ 6321', '§ 6323', '§ 6325', '§ 6326', '§ 301', '§ 301', '§ 301', '§ 301', '§ 6321', '§6020', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6020', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6323', '§ 6323', '§ 6323', '§ 6323', '§ 6323', '§ 6323', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6325', '§ 6323', '§6326', '§6325', '§ 6015', '§ 6903', '§ 6036']

LIENS - B S U J H T A X. COM
Request lien relief such as a lien release, withdrawal, discharge or subordination. This issue area addresses:
The effects of a Notice of Federal Tax Lien (NFTL)
How to avoid an NFTL
How to appeal a proposed or actual lien filing
How and when to request a lien release, withdrawal, discharge or subordination
Practice and Procedure Area
IRC § 6320, Notice and opportunity for hearing upon filing of notice of lien
IRC § 6321, Lien for taxes
IRC § 6323, Validity and priority against certain persons
IRC § 6325, Release of lien or discharge of property
IRC § 6326, Administrative appeal of liens
Reg. § 301.6320-1, Notice and opportunity for hearing upon filing of notice of lien
Reg. § 301.6321-1, Lien for taxes
Reg. § 301.6325-1, Release of lien or discharge of property
Reg. § 301.6326-1, Administrative appeal of liens
IRM 5.19.5, Lien Filing Determinations
IRM 5.19.6, Procedures for Filing Liens
IRM 8.22.7.9, Notice of federal tax lien
A federal tax lien exists when a taxpayer has an unpaid tax balance. A federal tax lien is the government’s legal claim against a taxpayer’s property when that taxpayer neglects or deliberately fails to pay a tax debt. The lien protects the government’s interest in all of the taxpayer’s property, including real estate, personal property and financial assets. Per IRC § 6321, a “silent” tax lien is created once all three of these conditions exist:
An IRS tax assessment creates a balance due,
The IRS sends a notice and demand for payment to your client, such as CP14, Balance Due, and
Your client refuses or neglects to pay the amount due within 10 days of the date on that notice
The IRS will typically file a Notice 668Y, Notice of Federal Tax Lien, at the county courthouse in the county where your client resides to alert creditors that the government has a legal right to your client’s property. The IRS must notify your client that it has filed the Notice of Federal Tax Lien (NFTL) within five business days. Typically the IRS will not actually file the Notice of Federal Tax Lien (NFTL) until after your client has received several balance due notices, culminating in a Final Notice of Intent to Levy and Notice of Your Right to a Hearing such as Letter 1058/LT11 or CP90. These final notices give your client 30 days to respond before the IRS files an NFTL.
An NFTL attaches to all of your client’s property and rights to property, including real, personal, tangible and intangible property. This also includes any property your client acquires after the IRS files the NFTL.
The IRS typically will not file an NFTL if either:
The aggregate balance due is less than $10,000 or
Your client enters into a streamlined installment agreement for $50,000 or less. If your client’s balance due is over $25,000, he or she must agree to a direct debit installment agreement to avoid the filing of a federal tax lien
For your client to obtain a streamlined installment agreement, your client’s unpaid assessed balance must be $50,000 or less and your client must be able to pay the entire balance within six years or by the collection statute expiration date, whichever is earlier. The unpaid assessed balance includes tax and assessed interest and penalties; it does not include accrued interest and penalties.
A taxpayer seeking an installment agreement for an amount exceeding $50,000 will need to supply the IRS with a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-F, Collection Information Statement. The taxpayer may also pay down his or her balance due to $50,000 or less to take advantage of this payment option.
An IRS payment plan in which a taxpayer pays off a tax balance owed via a series of monthly automatic debits from his or her bank account. Some benefits of using direct debit installment agreements are:
The user fee is lower for a direct debit installment agreement than for a regular installment agreement
The installment agreement default rate is reduced, because there is less of a chance that a payment will be missed
Since no check is involved, the chance of a payment being mishandled, misapplied or returned as incomplete is lessened
Effect of federal tax liens
It is most beneficial for your client to resolve his or her tax liability before the IRS files a Notice of Federal Tax Lien (NFTL). Once the IRS files an NFTL, it is a matter of public record and may affect your client's credit rating. A tax lien could reduce your client's credit score by as much as 100 points, and, if left unpaid, will remain on his or her credit report indefinitely. Credit-reporting agencies, such as Equifax, Transunion and Experian, will keep the tax lien on your client's credit record for seven years after the date the lien is satisfied.
A tax lien also affects your client's ability to sell or transfer property, including cars, boats and real estate, as well as your client's ability to refinance his or her home. Once the IRS files an NFTL, your client will have to contact the IRS to request a lien subordination or discharge before he or she can sell, transfer or refinance any assets.
A federal tax lien typically lasts 10 years from the date the IRS assesses the tax. The lien can be extended in certain situations, such as if your client:
Leaves the country for more than six months
Signs a waiver agreeing to extend the collection statute expiration date
Files a taxpayer assistance order, collection due process hearing request, innocent spouse relief request or offer in compromise
Was sued by the IRS before the statute expiration date and the IRS secures a judgment lien
The collection statute expiration date (CSED) is the date by which the IRS has to collect any outstanding tax liability. The CSED is usually ten years from the date on which the IRS assessed the tax liability. In assessing the tax liability, the IRS finalizes the review of your client’s tax return, calculates the amount of tax due and enters that balance into the IRS’ system.
How to avoid a tax lien before the IRS files a Notice of Federal Tax Lien
Your client can prevent the IRS filing a Notice of Federal Tax Lien (NFTL) by paying the taxes due in full, requesting a qualifying installment agreement or disputing the underlying tax owed. Your client also has the right to appeal a proposed NFTL filing through a Collection Appeals Program (CAP) hearing, if he or she can show that filing the tax lien will make it more difficult for him or her to pay the taxes due.
A Collection Appeals Program (CAP) hearing is available to protest a broad range of collection actions, including:
An IRS filing a Notice of Federal Tax Lien
An IRS levy or seizure of your client’s property
Termination, or proposed termination/modification, of an installment agreement
A CAP hearing is generally quicker than a Collection Due Process (CDP) hearing. Unlike in a CDP hearing, in a CAP hearing, the taxpayer may not challenge the existence or amount of the tax liability. The taxpayer cannot go to court if he or she disagrees with the outcome of the CAP hearing. The Appeals officer’s is final.
If your client cannot pay the balance due in full, he or she can request a guaranteed installment agreement (IA) or a streamlined IA. The IRS typically will not file an NFTL if your client qualifies for one of these IA options. If your client’s balance due is $25,000, the IRS may file an NFTL if your client does not agree to have the monthly payment directly debited from his or her checking account. If your client owes more than $50,000, consider recommending that your client pay enough to bring the balance below $50,000 to prevent the IRS filing a tax lien.
This agreement is available if your client owes $10,000 in taxes (without penalties or interest) or less to the IRS. Your client must be able to pay the entire balance within three years or by the collection statute expiration date, whichever is earlier, and must not have had an IA in the five previous years. The IRS typically grants this type of IA upon request.
If your client has grounds to dispute the balance due, he or she may:
File an original return to replace a substitute for return filed by the IRS
Request audit reconsideration
Dispute a CP2000, Notice of Proposed Adjustment for Underpayment/Overpayment, deficiency adjustment
Per IRC §6020(b), if the IRS does not receive a tax return for a taxpayer, the IRS has the right to file a substitute for return (SFR) on behalf of the taxpayer. The IRS uses information provided by third parties such as employers and financial institutions to determine the taxpayer’s tax liability. When filing the SFR, the IRS does not allow any deductions or credits other than the standard deduction and exemption amounts for the taxpayer. The return is filed as single or married filing separately.
The IRS issues CP2000 when the IRS has information reported by a third party such as employers and financial institutions that does not match what a taxpayer reported on the tax return. The IRS will usually assess additional tax, penalties and interest if the taxpayer does not respond to the notice or if the taxpayer’s response does not change the IRS’ position.
If the IRS has reason to believe that one of the actions listed above will eliminate the balance owed or bring it below $10,000, the IRS may agree to delay filing an NFTL. You may need to provide substantiation that your client will likely owe an amount less than $10,000 after the IRS adjusts the balance due.
Requesting lien relief after the IRS files a Notice of Federal Tax Lien
If your client needs relief from a Notice of Federal Tax Lien, he or she can:
Request lien subordination to enable your client to refinance a loan, obtain a home equity line of credit or obtain a loan consolidation to facilitate payment of the tax. Subordination does not remove the lien, but allows your client’s other creditors to take priority over the IRS.
Request lien withdrawal to enable your client to correct an IRS error, facilitate collection of the tax, or if your client agrees to a direct debit installment agreement for a balance of $25,000 or less. Lien withdrawal removes the public notice and “erases” the original lien as if it was never there.
Request lien discharge to enable your client to transfer ownership of property with a sale or transfer of property. Discharge allows the property to be sold free of the lien.
Request lien release with full payment of the balance due, bankruptcy, surety bond or expiration of the statute. Per IRC § 6325(a), the IRS is required to issue a lien release within 30 days of the date on which:
The liability is satisfied
The liability is legally unenforceable
The IRS accepts a bond
Appeal the IRS’ filing of a lien by offering a qualifying payment alternative through a Collection Due Process (CDP) hearing.
A taxpayer has the right to request a Collection Due Process (CDP) hearing with the IRS Office of Appeals for certain collection actions, including the filing of a Notice of Federal Tax Lien on an unpaid tax balance.
The IRS must notify a taxpayer that the IRS filed an NFTL against the taxpayer within five business days of the lien filing. This notice may be mailed, given to the taxpayer, or left at the taxpayer’s home or office. The taxpayer then has 30 days from the date on the notice to request a CDP hearing with IRS Office of Appeals. The lien notice will indicate when this 30-day period expires.
At the conclusion of the CDP hearing, the IRS Office of Appeals will issue a determination letter. If the taxpayer doesn’t agree with the Appeals office’s determination, the taxpayer may request judicial review of the determination by petitioning the United States Tax Court within the time period specified in the determination letter.
After your client requests lien relief, the IRS may take several months to initiate action on the request. If your client is suffering economic hardship or may face adverse action by the IRS as a result of the lien, your client may contact the Taxpayer Advocate Service (TAS) for assistance. Call the TAS at (877) 777-4778 and/or file Form 911, Request for Taxpayer Advocate Service Assistance.
The Taxpayer Advocate Service (TAS) is a quasi-independent organization within the IRS. TAS employees help taxpayers who are experiencing economic harm, are seeking help resolving tax problems that haven't been resolved through normal channels, or believe that an IRS system or procedure is not working as it should. Taxpayers may be eligible for assistance if they are experiencing economic harm or significant cost, including fees for professional representation.
Taxpayers who need assistance may contact the TAS by calling (877) 777-4778 or by filing Form 911, Request for Taxpayer Advocate Service Assistance.
To help your clients address federal tax liens, this issue area covers:
How to avoid the filing of a federal tax lien
How and when to request a lien subordination, withdrawal, discharge or release
How and when to appeal the proposed or actual filing of a federal tax lien
Under what circumstances will the IRS file a lien if my client cannot pay in full?
Generally, the IRS will file a lien if your client:
Has an aggregate unpaid balance of any amount and is not compliant in filing returns or making federal tax deposits, estimated tax payments and/or proper withholdings
Owes more than $10,000 for all tax years and forms and the IRS determines that filing a lien will encourage your client to pay the balance due
Owes an aggregate balance of more than $10,000 and cannot pay
Is in an installment agreement that does not meet the streamlined, guaranteed or in-business trust fund express criteria
Has a balance due and owns property that was not discharged in bankruptcy
Has a balance due, lives outside the United States and has known assets
Who makes the decision to file a lien?
The IRS Collection function requesting payment of the balance due makes the decision to file a lien.
The Automated Collection System (ACS) collects smaller, non-business-related liabilities. If a taxpayer does not respond to ACS notices and letters requesting payment and the taxpayer meets the lien criteria, the IRS will eventually file a lien. These automated liens are sent through the IRS Centralized Lien Processing Unit.
If a local IRS revenue officer has been assigned to collect unpaid balances, he or she will make the lien determination.
When does the IRS file a lien?
The IRS Centralized Lien Processing Unit will file a lien after the IRS sends a series of notices to your client, if your client meets the lien criteria. The IRS will make a lien determination and file a lien on a new unpaid balance within four to six months of the tax assessment if your client does not address the balance due. The IRS will also make a lien determination when your client arranges to pay the balance due by installment agreement, payment deferral or another method, such as an offer in compromise. The IRS has the right to file a lien 10 days after initial contact with your client, although this is generally not enforced except in cases of extreme noncompliance or when the IRS determines that collection of the balance may be in jeopardy.
When is a lien posted to a credit report?
A lien becomes public record when the IRS files a Notice of Federal Tax Lien at your client's county courthouse. Credit agencies periodically search public records for liens and, depending on the credit agency, the lien can appear on your client's credit report as soon as one month after the lien is filed.
Can my client get an extension to pay the tax liability and avoid a lien?
Yes, your client may be able to avoid a lien by requesting an extension of time to pay the tax liability. However, your client must request the extension before the IRS makes a lien determination. For taxpayers with new unpaid balances who have filed all prior year returns, the IRS will generally grant a one-time extension of up to 120 days to pay the balance before filing a lien. Exercise caution when requesting an extension to delay a lien filing; the request could trigger an accidental filing by the IRS Centralized Lien Processing Unit. If this happens, be prepared to document your discussions with the IRS and involve the Taxpayer Advocate Service.
What extenuating circumstances will the IRS consider if my client wants to avoid a lien filing?
The IRS may determine that filing a lien is not in the best interest of the government and your client. If a tax lien would make it more difficult for your client to pay the balance due, the IRS may forego filing. For example, a lien could hurt business operations or impede your client's ability to borrow money or find employment, making it difficult for your client to pay the balance due.
How long does the lien subordination process take?
The lien subordination process generally takes 30 days from the date of the completed lien subordination request. In times of high refinancing activity, the process may take up to 90 days. Contact the IRS Advisory Group for an update on the status of your client’s request. If the IRS approves the request, it will issue a conditional commitment letter and provide a projected date for mailing the certificate.
When will the IRS send the certificate of subordination?
For IRC § 6325(d)(1) requests for lien subordination for cash-out refinances and home equity lines of credit, the IRS will send the certificate of subordination when:
Your client meets the conditions for the subordination, per the conditional commitment letter sent by the IRS, and
The government’s interest in the property subject to the tax lien is satisfied.
For IRC § 6325(d)(2) requests for lien subordination for rate or term reduction refinances and consolidations in which the government is not receiving immediate payment, the IRS provides the certificate of subordination after the IRS Advisory Group completes its investigation, verifies the information provided and approves the subordination.
Who decides to issue the certificate of subordination?
A local IRS Advisory Group will review and verify the information your client provided, determine whether it should issue a certificate of subordination and contact your client, his or her representative and/or any person involved with the transaction for more information. The Advisory Group manager is responsible for reviewing and approving the determination and notifying your client of the outcome. If the Advisory Group approves your client’s request for lien subordination, it will issue a conditional commitment letter.
When will the IRS approve lien subordination?
The IRS will allow lien subordination if it is in the best interest of the government, such as when:
The IRS will receive the residual proceeds from the loan refinance.
The lien subordination will enable your client to increase his or her monthly installment agreement payments.
When is lien release a better option than lien withdrawal?
Lien release may be a better option than lien withdrawal if your client can pay the tax liability in full. Lien release requires that your client pay the tax, penalties and interest in full. Lien release can be completed in as little as one day, if your client delivers a certified check for the payoff amount to an IRS office. However, to obtain lien release, your client must pay the full amount, even if your client disagrees with the underlying liability.
Lien withdrawal may be a better option for your client if the property transaction will take several months to complete. An advantage to lien withdrawal over lien release is that the tax lien is removed from your client's credit record. However, property transactions take time, especially if your client requests a lien withdrawal for a reason other than full payment of the liability in question.
What is the difference between a lien release and a lien withdrawal?
The IRS grants lien release only when your client pays the tax balance in full or posts a bond, or when the IRS deems the balance uncollectible. The IRS can grant lien withdrawal regardless of whether the tax has been paid in full. Lien release and withdrawal are recorded at your client's local county courthouse. A lien release does not remove the tax lien from your client's credit report, but a lien withdrawal does. If your client has paid the balance in full, he or she must request lien withdrawal to remove the lien from his or her credit history. If your client does not request lien withdrawal, the IRS will issue only the required certificate of release of federal tax lien and the lien will stay on your client's credit report for about seven years.
How long does it take for the IRS to withdraw a tax lien?
The IRS will generally review a completed lien withdrawal application within 30 to 45 days. In high-volume periods, it may take up to 90 days for the IRS to review the application. The IRS may take an application for lien withdrawal over the phone if your client pays the balance in full or establishes a qualified installment agreement. The IRS generally grants lien withdrawal more quickly with full payment of the balance due. When setting up an installment agreement, your client will usually need to pay by direct debit to negotiate lien withdrawal. In some circumstances, the IRS may wait for several successful payments to clear before granting lien withdrawal.
Will the IRS withdraw a lien without full payment of the tax?
The IRS will withdraw a federal tax lien without full payment:
To facilitate payment of the tax
If the lien was filed when your client's installment agreement did not allow for it
If the lien was filed in error, or too soon
When your client enters into a qualified installment agreement, including direct debit, guaranteed or streamlined installment agreements
Who decides to withdraw a lien?
The IRS Collection function, which accepts full payment or qualified installment agreements, makes the decision to withdraw a lien. A local IRS Advisory Group evaluates written requests for lien withdrawal for erroneously filed liens or to facilitate payment of the tax.
What can my client do if the IRS refuses to grant a lien withdrawal?
First, you can request reconsideration from the Collection function manager who denied the withdrawal. Appeal the lien withdrawal denial with the Collection function or IRS Advisory Group that denied the request. If the Collection function or IRS Advisory Group appeals the appeal request, immediately file a Form 9423, Collection Appeal Request.
Who makes the decision to discharge a tax lien?
Under IRC § 6325(b), the IRS has sole discretion on the decision to discharge a lien. The decision is not subject to judicial review. Your client’s local IRS Advisory Group has the authority to grant lien discharge. If it approves the lien discharge, it will issue your client a conditional commitment letter. If the Advisory Group denies lien discharge, first appeal to the IRS Advisory Group manager to request reconsideration. If the manager doesn't approve the request, file Form 9423, Collection Appeal Request, with the Advisory Group manager immediately.
How long does the lien discharge process take?
The IRS requests that your client send the complete discharge application at least 45 days before the sale. In the case of a foreclosure, the IRS will send a conditional commitment letter for a certificate of discharge within 30 days of receiving a complete and approved application.
Can my client request an expedited decision from the IRS on a lien discharge request?
In the case of a foreclosure or other urgent circumstances, the IRS will expedite the discharge application. The application should include documentation of your client’s circumstances, such as foreclosure, attached to Form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien. To speed the process, ensure that the application is complete and legible, and include all requested documents.
Is there a fee for lien discharge?
There is no fee to discharge a federal tax lien from your client’s property.
Can a denied lien discharge application be appealed?
Yes. Your client has appeal rights within the IRS, but there is no judicial appeal for a denial of lien discharge. You must first request a conference with the Advisory Group manager. If the manager doesn't approve your client’s request for lien discharge, file Form 9423, Collection Appeal Request, with the manager immediately. It is important to attach documentation that supports your position to Form 9423.
What documents are needed to apply for a lien discharge?
The documents required to submit with an application for lien discharge depend on your client's circumstances. Some required documents include:
Copy of the deed or title showing the legal description of the property
County valuation of the property, independent valuation of property and proposed selling price, if your client plans to sell the property at an auction
Copy of the Notice of Federal Tax Lien(s)
List of encumbrances against the property that have priority over the tax lien, including detailed information on each encumbrance
Closing statement, such as HUD-1
Itemized list of all closing costs, commissions and expenses of any transfer or sale of the property
Any court documents associated with the lien filing
Foreclosure or litigation information
Explanations of unusual circumstances
Draft of escrow agreement, if you are applying under IRC § 6325(b)(3)
Also include Form 2848, Power of Attorney and Declaration of Representative, if you are representing your client.
How long does it take for the IRS to release a lien?
IRC § 6325(a) directs the IRS to release a federal tax lien within 30 days after a tax liability is satisfied or becomes legally unenforceable. Expedite the release by paying with a certified or cashier's check or a postal or bank money order. In some emergency situations, a local IRS office will issue a lien release immediately with proof of payment.
Will the IRS release a lien without the tax being paid in full?
The IRS will release a federal tax lien without full payment if your client posts a surety bond through a U.S. Treasury-approved surety company. See Circular 570 at www.fms.treas.gov for a listing of approved surety companies.
Who makes the decision to release a lien?
The IRS Centralized Lien Processing Unit handles requests for lien release when taxpayers pay in full. It will determine whether your client meets the criteria for release and send a certificate of release of federal tax lien to your client and his or her local courthouse. Your client’s local IRS office can also issue a lien release upon request, with proof of full payment of the tax.
What can my client do if the IRS refuses to send a lien release?
The IRS will grant a lien release only when your client pays off an unpaid tax balance in full, when the IRS deems a balance uncollectible because the collection statute has expired, or when the IRS accepts a bond. Direct your lien release request to the local IRS Advisory Group. If you cannot settle the dispute with the Advisory group, the taxpayer can request a Collection Appeals Program (CAP) hearing.
Does the IRS withdraw or release a lien when the collection statute of limitations expires?
The IRS does not issue a certificate of release or withdrawal when the collection statute expires. The lien "self-expires" unless the IRS re-files the lien. IRC § 6325(a) directs the IRS to release a federal tax lien within 30 days after a tax liability is fully paid or the statute of limitations has expired. However, the IRS will not send a certificate of release of federal tax lien when the statute of limitations expires. Form 668Y, Notice of Federal Tax Lien, lists the date that the lien self-expires in column (e) of the form. This serves as the lien release document after the statute expires. If Form 668Y is not sufficient proof of release for an outside party, request a certificate of release or equivalent IRS letter by contacting the local IRS Advisory Group or calling the IRS Centralized Lien Processing Unit at (800) 913-6050.
What are my client’s appeal options?
Collection Due Process (CDP) hearing: Available for 30 days after the tax lien is filed.
Equivalent hearing (EH): If you miss the deadline to request a CDP hearing, request an EH between 30 days and one year after the lien was filed.
Collections Appeals Program (CAP) hearing: Available any time before or after a lien is filed. Before requesting a CAP hearing, request reconsideration of the lien relief request with the manager of the IRS Collection function. If you don't reach an agreement with the manager, you have two days to file a CAP hearing request with Form 9423, Collection Appeal Request. To avoid damage to your client's credit, it is best to appeal an IRS determination to file a lien before it is filed. If you are unsuccessful in appealing a proposed lien, you can use one of the three appeals methods to appeal the lien after it is filed.
There is no fee to appeal a proposed or filed lien to the IRS.
What is the difference between a collection due process hearing and an equivalent hearing?
A collection due process (CDP) hearing and an equivalent hearing (EH) both allow your client to appeal the filing of a tax lien. Your client has further judicial appeal rights with a CDP hearing. An EH does not have judicial review and the Appeals officer's decision is final.
How long does a federal tax lien last?
A federal tax lien is in effect from the date the tax is assessed until the lien is satisfied or the collection statute expires. For credit reporting purposes, a federal tax lien will last at least seven years from the date of filing unless the IRS withdraws the lien. If the lien remains unpaid, it can stay on a credit report indefinitely.
What property is attached to a federal tax lien?
A federal tax lien attaches to all of your client's property and rights to property, including any property your client acquires after the IRS files the lien. This includes real, personal, tangible and intangible property as well as your client’s rights to that property.
How long does it take to appeal a federal tax lien?
The lien appeal processing time depends on the type of appeal.
Collection Due Process (CDP) hearing: The IRS will try to hold a CDP hearing within 45 days of the date on your client's request. In high-volume periods, it may be as long as four months before the CDP hearing. Depending on the complexity of your client’s request, the process usually takes two to six months.
Equivalent hearing (EH): The IRS will try to hold an EH within five to 15 days of the date on your client’s request. In high-volume periods, it may be as long as two months before the EH hearing. Depending on the complexity of your client’s request, the process is usually completed in one to four months.
Collection Appeals Program (CAP) hearing: After your client makes an initial CAP request, the IRS will respond within two to five days. The second CAP hearing with an Appeals officer should be held within five days of the date on your client’s request. The IRS may issue its decision by phone. The IRS will always provide your client a follow-up letter with the case determination in writing. Depending on the complexity of your client’s request, the process can take from two days to more than three weeks in high-volume periods.
Who makes the decision to remove a federal tax lien?
The IRS Appeals officer decides whether to remove the lien. If your client is appealing the denial of lien relief with a Collection function manager, the manager can make the decision.
Five-Minute Workshops
Most taxpayers assess their own tax by filing a tax return. When your client files a return, the IRS processes the return and updates your client's account with the amount of tax liability on the return, as well as the payments and credits. If there is a balance due on the return that is not paid, the IRS will begin sending balance-due notices to your client.
There are several ways that your client can owe other than filing a return. These assessments, if unpaid, all result in the IRS issuing notices demanding payment.
The IRS can assess an additional amount due during an audit. In fact, the IRS assesses additional deficiencies in almost 90% of all audits conducted.
IRS discrepancy adjustments
IRS adjustments to a tax return may result in a deficiency, referred to as a discrepancy adjustment. The IRS makes discrepancy adjustments using wage and income information or flow-through income information. For example, the IRS can make discrepancy adjustments based on unreported income if your client does not file a tax return recording all of his or her income. The IRS issues CP2000, Notice of Proposed Adjustment for Underpayment/Overpayment, about the discrepancy, which adds additional amounts to the balance due. If your client does not pay the balance due, the IRS will issue a notice and demand for payment.
Substitute for return deficiencies
If your client does not file a tax return, the IRS can file a tax return form under IRC § 6020(b) of the Internal Revenue Code. The IRS files a substitute for (SFR) return only if your client doesn't file and there will be an additional balance due based on the wage and income information the IRS has received. Thus, an SFR will always result in a balance due and, if left unpaid, will result in the IRS issuing a notice and demand for payment.
Trust Fund Recovery Penalty deficiencies
If an employer does not pay the required payroll taxes, the IRS can assess a trust fund recovery penalty (TFRP) against the officers and employees of the business who willfully neglect to collect, account for and remit those taxes to the government. Those responsible then become liable for the employer’s employment taxes, even though the employer may be a corporation, a partnership or other business entity. As a result of this assessment, if the business does not pay these taxes, the IRS may collect the taxes from the responsible people individually.
If an individual owes taxes and transfers assets out of the legal reach of the IRS for less than the full, fair and adequate consideration, the transferee may assume the liability for the transferor's taxes. This is referred to as transferee liability.
For example, your client enters into a transaction with someone who owes back taxes. The person who owes taxes knowingly or inadvertently transfers property to your client. The transaction is not at arm's length. The IRS can now collect on the assets transferred to your client to satisfy the transferor’s liability.
A transaction in which the buyers and sellers of a product act independently and have no relationship to each other. The concept of an arm's length transaction is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other party. In a true arm's length transaction, the value of goods and services transferred is at fair market value.
Collection process steps
Step 1: Notice and demand for payment
Initially, the IRS will send a notice and demand for payment, usually with CP14, Balance Due. This notice gives your client a short period of time — usually 30 days — to pay the balance due. This notice is typically an automated notice requesting immediate payment of the tax liability and is issued by an IRS service center.
Step 2: Requests for payment or other arrangements
If your client does not respond and pay in full the balance due shown on the CP14, the IRS can proceed with more notices requesting payment, such as CP501, Reminder – Balance Due.
After about five weeks, if your client has not paid the tax or entered into a payment agreement with the IRS, the IRS will send CP503, Second Request Notice – Balance Due, demanding payment.
Note: The IRS may bypass sending CP501 and CP503 if it determines that your client is a repeater (i.e., someone who continually owes taxes).
Step 3: Assignment to Collection
If your client does not pay the balance due or make other arrangements with the IRS within five weeks of receiving CP503, the IRS' automated system will then issue CP504, Notice of Intent to Levy, sent certified. This notice and demand for payment informs your client that he or she has been assigned to the IRS Collection function. This notice also advises your client that the IRS is beginning the process of filing a lien and/or levy to collect the balance due.
If your client does not pay the tax or enter into an alternative agreement with the IRS, it will issue a Letter 1058, Final Notice Reply Within 30 Days, (or its equivalent) five weeks after sending CP504.
The IRS normally collects unpaid balances through its Automated Collection System (ACS). However, in more serious cases, such as when the taxpayer owns a business, has a high unpaid balance or has unfiled returns, the IRS may enforce the unpaid balance through a local area office revenue officer (RO).
Lien determination
Although the IRS has the right to file a tax lien 10 days after the first contact (a balance-due notice), it generally follows the notice process, for which Letter 1058 is the final notice.
Your client's account must meet all the following requirements for a statutory lien to be filed:
A tax return or an IRS assessment, such as an audit or adjustment on a filed tax return, creates a balance due
Your client refuses or neglects to pay the amount due.
When the IRS issues Letter 1058 or its equivalent, your client has met the three criteria shown above for a lien determination to be made. Thirty days after sending the Letter 1058, the IRS will determine whether it will file a lien on your client's account. When the IRS files notice of the lien, your client's creditors are publicly notified that the IRS has a claim against all of your client's property. This notice is filed at your client's local courthouse.
A filed federal tax lien attaches to all of your client's property and rights to property, including real, personal, tangible and intangible property. The lien also includes any property your client acquires after the lien is filed. The lien notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or real estate sales.
The IRS commonly files a lien if:
Your client owes more than $10,000 and has not made arrangements with the IRS to pay his or her tax liability.
Your client owes more than $50,000, regardless of whether he or she is in an IRS payment agreement.
Lien-filing situations
IRS Collection personnel are required to make a lien determination on unsatisfied accounts. The IRS uses certain parameters to decide which liens are automatically filed. Your client must request that a lien not be filed and provide a valid reason to divert the IRS from its normal operating procedures.
The IRS will most likely file a tax lien if your client has an unpaid balance of more than $10,000 and either cannot pay or has not made formal payment arrangements with the IRS.
The IRS will also file a lien if your client owes more than $50,000, regardless of whether he or she is in a payment agreement with the IRS. In some circumstances, your client can make other arrangements, such as obtaining a surety bond, so that the IRS does not file a tax lien.
The IRS will likely not file a lien if your client has an unpaid balance of less than $10,000 or your client owes less than $50,000 and can pay off the balance through an installment agreement before the statute expires or within six years.
When the IRS files a lien, your client will receive Letter 3172, Notice of Federal Tax Lien Filing and Your Rights to a Hearing under IRC 6320, accompanied by Form 668Y, Notice of Federal Tax Lien. Letter 3172 informs your client that a lien has been filed. Form 668Y is your client's copy of the federal tax lien.
Criteria for not filing or deferring the federal tax lien
Generally, the IRS will not file a lien in the following circumstances:
Taxpayer lives abroad and has no known assets in the United States
There is an indication that the liability has been satisfied or that credits will satisfy the debt
Taxpayer is in bankruptcy and the liabilities occurred before bankruptcy
The liability may not be valid
Depending on your client's situation, there are several options available to resolve a federal tax lien.
Your client can prevent the filing of a federal tax lien by resolving his or her tax liability with the IRS.
After receiving a balance-due notice from the IRS, your client can opt to pay the tax liability in full to avoid the filing of a federal tax lien.
To pay an unpaid balance in full and avoid a lien filing:
Verify the balance due amount with the IRS
Get a certified check for the amount that properly notes all pertinent payment information
Hand-deliver payment to the local IRS office
Obtain a date-stamped copy of the check with the payment details
Set up a qualifying IRS agreement
If your client cannot or does not want to pay the balance due in full, he or she may request a qualifying agreement:
In-business trust fund agreement (business payroll taxes)
If your client receives a balance-due notice from the IRS and qualifies for an installment agreement, he or she can pay the IRS a monthly amount determined by his or her income and other financial information. Be sure your that client's withholding is sufficient so that he or she will not owe for the current year. In this scenario, the IRS normally would not file a lien.
Pay balances due under $50,000 and set up a qualifying IRS agreement for the remaining balances
If your client owes more than $50,000, he or she can pay enough to bring the balance under $50,000 and set up a streamlined installment agreement for the remaining balance. Be sure that your client's withholding is sufficient so that he or she won't owe for the current year. In this scenario, the IRS normally would not file a lien.
Dispute tax owed
Your client may want to dispute the tax owed with one of the following options:
Amended tax return for the year with a lien
Request for audit or substitute for return reconsideration
If your client receives a balance-due notice from the IRS and wants to dispute the tax liability with an amended tax return, he or she should file the amended return with the IRS and request that the IRS suspend collection while the amended return is being processed. If the IRS agrees to suspend collection, this should avoid a lien filing.
Lien subordination is when the IRS allows another lien your client has to take priority over the federal tax lien. If a lien is in place, you client will not be able to refinance or consolidate debt unless he or she requests and is granted lien subordination. This happens only when the IRS will gain the value of the lien on the property your client is acquiring, such as a second mortgage.
When to request lien subordination
Lien subordination generally applies when your client wants to restructure a current loan or consolidate debt. There are three types of lien subordination:
Cash-out refinance requested under IRC § 6325(d)(1)
Rate/term refinance requested under IRC § 6325(d)(2)
Debt consolidation requested under IRC § 6325(d)(2)
IRC § 6325(d)(1) cash-out refinance
The IRS may subordinate a lien to allow cash-out refinance when proceeds from a refinance or home equity line of credit will go toward taxes owed.
Example: Your client owns a home with a market value of $200,000 and a loan of $100,000. He can refinance up to 80% of the home’s value ($160,000). After $5,000 in closing costs, your client receives a $55,000 payout from the refinance with NewBank to put toward his tax liability. The IRS subordinates the federal tax lien in favor of the new mortgagor, NewBank.
IRC § 6325(d)(2) rate/term reduction refinance
The IRS may subordinate a lien to allow rate/term reduction refinance when lower interest rates or better terms will allow a higher monthly repayment rate on the tax liability.
Example: Your client pays $1,600 per month for her mortgage, $150 of which goes toward private mortgage insurance (PMI). The taxpayer refinances with NewBank to lower her interest rate and remove the PMI. Your client has a new monthly payment of $1,200 and the IRS subordinates the lien in favor of the new mortgagor, NewBank. Now, your client can pay an additional $400 per month toward her IRS installment agreement.
IRC § 6325(d)(2) debt consolidation refinance
The IRS will subordinate a lien to allow debt consolidation refinance when a lower consolidated monthly payment leaves additional funds to apply to the tax liability.
Example: Your client refinances to consolidate his mortgage and two car loans into one loan from NewBank. Before the consolidation, the total of his three monthly payments was $1,800. Now, your client's total consolidated monthly payment is $1,150. This leaves an additional $650 per month to apply to the tax liability. The IRS subordinates the federal tax lien in favor of NewBank.
Appeal a denied request for lien subordination
If the IRS denies lien subordination, an appeal with supporting documents may reverse the IRS’ decision.
Example: The IRS denies your client's request for lien subordination on a cash-out refinance, citing excessive closing costs. Your client files an appeal with supporting documents demonstrating that the closing cost estimates from other vendors are equal to or more than the costs submitted in the original application.
Process for requesting lien subordination
The IRS files a federal tax lien on unpaid tax balances at your client's local courthouse.
Your client applies for a refinance of a loan or a home equity line of credit.
The bank requires that the federal tax lien be subordinated before the refinance.
Prepare the lien subordination package with all the required attachments.
Submit the lien subordination request to the IRS Advisory Group.
The IRS Advisory Group investigates the application and all information provided to determine whether it is in the government's best interest to issue a certificate of lien subordination.
Wait 30 to 90 days for a determination.
The IRS issues its decision. If the IRS does not approve the request, follow up immediately with the Advisory Group manager and, if necessary, file an appeal via Form 9423, Collection Appeal Request.
If the request is approved for a cash-out refinance or home equity line, the IRS will issue a conditional commitment letter. For rate/term reduction refinances and consolidations (transactions from which the IRS will not receive direct proceeds), the IRS will provide a projected date for issuance of a certificate of lien subordination.
The IRS will issue cash-out refinance certificates of subordination when all conditions are met (i.e., receipt and clearance of payment to the government and other conditions dictated on the commitment letter).
Advantages of lien subordination
Full payment of tax not required
Disadvantages of lien subordination
Taxpayer compliance history may affect the IRS' decision to subordinate
Could take up to 90 days
May require extensive documentation
The IRS processing time for lien subordination is normally 30 days, but it may take up to 90 days depending on the volume of applications the IRS is processing.
The IRS may request more information
In addition to the required documentation, the IRS may request other documents to investigate whether lien subordination is in the best interest of the government. For example, the IRS may want financial documents that demonstrate how this transaction would increase your client's ability to pay. Review the application for completion and make sure you have attached all of the required documents.
If your client owes after the subordination
After the lien subordination, the IRS may request a new payment arrangement. In that case, your client will be routed to IRS Collections to determine his or her ability to pay and payment terms.
Lien withdrawal will remove the lien from your client’s property and credit report. Your client can submit Form 12277, Application for Withdrawal, to request that the lien be withdrawn. If the IRS accepts the application, the IRS will withdraw the lien and the credit reporting agency will remove the lien from your client’s credit report.
When to request a lien withdrawal
Request lien withdrawal when:
The tax has been paid in full since the lien was filed.
The tax was paid prior to the lien filing.
Lien withdrawal would expedite payment of the tax.
Your client was in an installment agreement that did not allow for a lien to be filed.
The lien was filed too soon or not according to IRS procedure.
Your client converts a current installment agreement to a direct debit installment agreement. There are restrictions in this situation.
The Taxpayer Advocate Service recommends withdrawal.
Your client is in an existing direct debit installment agreement and the remaining assessed balance is $25,000 or less.
Tax has been paid in full
The IRS will not automatically withdraw a lien when the tax is paid in full; your client must request withdrawal.
Example: Your client completes an IRS payment plan for the 2007-2008 Form 1040, U.S. Individual Tax Return, and no longer owes any taxes. He wants the lien removed from his credit report, so he requests a certificate of withdrawal of the lien.
Speed payment and collection of the tax [IRC § 6323(j)(1)(C)]
The IRS may withdraw a lien when lien withdrawal would help your client gain employment or credit to produce income or obtain a loan. This would allow your client to establish payments, increase payments or fully pay taxes owed to the IRS.
Example: The IRS files a tax lien in the name of your unemployed client. Your client is offered a job, provided that she is bondable, but the bonding company refuses to issue a bond because her credit score has been reduced by the lien and is unacceptably. Your client agrees to pay the tax due through payroll deductions if the IRS will withdraw the lien so she can start working. The IRS agrees to do so, but can file a lien again if your client defaults on the agreement.
Agreement does not allow for lien filing [IRC § 6323(j)(1)(B)]
The IRS may withdraw the lien if your client is in a qualified payment agreement with the IRS that did not allow for a lien to be filed.
Example: Your client owes $20,000 from 2008 and has been paying $400 per month as part of an installment agreement. The IRS filed a tax lien even though the installment agreement did not allow for a lien to be filed. Your client requests a lien withdrawal.
Convert regular installment agreement to direct debit agreement [IRC § 6323(j)(1)(B)]
Your client's current assessed balance must be $25,000 or less to convert an installment agreement to a direct debit agreement. The IRS may withdraw the lien if your client is able to pay the tax liability in full within 60 months or before the statute expires.
Example: Your client set up an installment agreement with the IRS for his balance of $30,000. He has mailed payments of $500 for the past 15 months, reducing his balance to $22,500. He can now pay by direct debit from his bank account and request lien withdrawal after he has made three consecutive electronic payments.
Lien was filed too soon or not according to IRS procedure [IRC § 6323(j)(1)(A)]
The IRS may withdraw the lien if it was filed too soon or not according to IRS procedure. Requesting withdrawal is quicker than appealing the lien filing through a collection due process (CDP) hearing, but a CDP hearing allows judicial review.
Example: Your client requests 30 days to pay her tax liability in full, without a lien, and the IRS grants her request. Ten days later, the IRS files a tax lien without obtaining manager approval, as required in the Internal Revenue Manual. Your client requests lien withdrawal because the filing was not in accordance with IRS administrative procedure.
Taxpayer Advocate Service recommended [IRC § 6323(j)(1)(D)]
The IRS may withdraw the lien if the Taxpayer Advocate Service recommended lien withdrawal because it is in the best interest of the government and your client.
Example: Your client files a Taxpayer Assistance Order with the Taxpayer Advocate Service, claiming that he can't purchase inventory to sell because of the tax lien. The advocate considers all of the facts and determines that lien withdrawal is in the best interest of the government and your client, so that your client can purchase inventory to sell and then make payments on the outstanding tax liability.
Your client is in an existing direct debit installment agreement with an assessed balance of $25,000 or less [IRC § 6323(j)(1)(B)]
The IRS may withdraw the lien if your client has a direct debit installment agreement (DDIA) for an assessed balance of $25,000 or less and your client can pay the remaining balance in full within 60 months or before the statute expires. Your client must be compliant with all filing and paying requirements, have made at least three consecutive electronic payments and not have had a lien withdrawn on any of the tax years included in the DDIA.
Example: Your client has paid the assessed balance on his or her direct debit installment agreement down to $24,500. Your client will pay the balance in full within 56 months, has made four consecutive electronic payments and has had no liens withdrawn on any of the tax years included in the installment agreement. Your client can request a lien withdrawal.
Appeal the denial of a lien withdrawal
If the IRS denies lien withdrawal, an appeal with supporting documents may reverse the IRS’ decision.
Example: The IRS denies your client's request for lien withdrawal after she sets up a direct debit streamlined installment agreement. Your client files an appeal, showing extraordinary circumstances for past noncompliance to the Appeals manager. If the manager does not approve the request, your client can file a Form 9423, Collection Appeal Request, with the manager immediately.
Process for requesting lien withdrawal
The IRS files a federal tax lien on unpaid tax balance(s) at your client's local courthouse.
Your client meets one of the following criteria:
Your client already paid the lien balance(s).
Lien withdrawal would allow your client to pay the tax faster.
The IRS filed a lien for your client's installment agreement that didn't allow for a lien filing.
The IRS filed the lien in error or too soon.
Your client is entering into a qualified installment agreement.
Your client is in an existing direct debit installment agreement with a remaining assessed balance of $25,000 or less.
Prepare a Form 12277, Application for Withdrawal, of Federal Tax Lien with the required documentation.
Submit the application to the appropriate IRS function.
The IRS issues its determination.
If the IRS denies the request, follow up immediately with the Advisory Group manager and, if necessary, file an immediate appeal via Form 9423, Collection Appeal Request.
If the IRS approves the withdrawal request or appeal request, the IRS issues a certificate of withdrawal.
Advantages of lien withdrawal
Removes the lien from your client's credit history
Your client may not have to pay the tax in full with a qualified agreement
Disadvantages of lien withdrawal
Could take 30 to 90 days or more
Using a qualified installment agreement to remove lien may require significant funds
IRS may request more information
In addition to the required documentation, the IRS may request other documents to investigate whether lien withdrawal is in the best interest of the government. For example, the IRS may want financial documents that demonstrate how this transaction would increase your client's ability to pay. Review the Form 12277, Application for Withdrawal, application for completion and make sure your client has attached all of the required documents.
The IRS processing period for Form 12277, Application for Withdrawal, is normally 30 days, but it may take up to 90 days depending on the volume of applications being processed and the thoroughness of the application and supporting documents.
Your client must file all future returns by the filing date and must pay the balance due in full by the deadline. Correct any underwithholding and have your client make required estimated tax payments. If the IRS thinks your client will file a return with a balance due in the future, the IRS may challenge your client's request for lien withdrawal.
IRS will send notice of withdrawal to creditors upon request
When your client pays the tax in full, he or she can request a certificate of withdrawal that removes the lien from public records. If your client needs additional copies of Form 10916(c) in the future, send a written request to the Technical Services Group manager using the Advisory Group addresses. The request must provide:
Name, current address and Taxpayer Identification Number of the person making the request
Copy of the notice of withdrawal (if available)
Names and addresses of any credit reporting agencies, financial institutions or creditors to be notified of the withdrawal
If your client is in a regular installment agreement with an aggregate balance of $50,000 or less, he or she can convert to direct debit payments and request lien withdrawal.
Lien discharge removes a lien from a specific piece of property to allow your client to sell that property in certain situations, such as if the sale will benefit the IRS.
When to request lien discharge
Your client should request a lien discharge in any one of the following conditions:
IRS will receive remaining proceeds of the sale of the property
No equity in the property being sold (short sale or break-even sale)
Sale of property with full lien (escrow agreement)
Purchased property subject to lien
Other property valued at two times lien amount
IRS receives remaining proceeds of property sale [IRC section 6325(b)(2)(A)]
Example: Your client wants to sell property worth $50,000, and the buyer wants clear title to the property being purchased. The property has debt and expenses of sale equal to $45,000. Your client owes the IRS $80,000 in back taxes. He would request lien discharge under Section 6325(b)(2)(A) and pay the IRS $5,000 at closing.
No equity in property sold (short sale or break-even sale) [IRC § 6325(b)(2)(B)]
The IRS may discharge the lien on a piece of property if the owner has no equity in the property (the debt and expenses on the property exceed its value). The IRS would not receive proceeds from this sale.
Example: Your client wants to sell property worth $50,000, and the buyer wants clear title to the property being purchased. The property has debt and expenses of sale equal to $65,000. Your client owes the IRS $80,000 in back taxes. She would request lien discharge under Section 6325(b)(2)(B), because she has no equity in the property, and the IRS would not receive any proceeds at closing.
Money remains after sale of property, and sales proceeds require escrow (auction or foreclosure) [IRC § 6325(b)(3)]
Secured creditors, including the IRS, are disputing their respective rights to the sale proceeds, which are held in an escrow account while the disputes are settled.
Example: Your client's property is foreclosed and sold for $100,000. Lien amounts among multiple parties on the property total $150,000. There is a dispute about who is in priority. One of the parties with a lien can apply for lien discharge under IRC § 6325(b)(3) to allow for the sale and for the buyer to have clear title while the dispute over the proceeds is resolved.
Purchased property with a federal tax lien attached [IRC § 6325(b)(4)]
Your client deposits the amount of money needed to discharge the lien or furnishes a bond for the same amount.
Example: Your client purchased property in 2001 that was subject to a tax lien. She did not get a certificate of discharge upon purchase, so the lien was still in effect on the transferred property. Your client wants to sell the property, free of the tax lien. She requests a lien discharge under IRC § 6325(b)(4) and deposits the amount to satisfy the lien, as determined by the IRS. The IRS grants lien discharge.
Property not sold worth twice the debt to the IRS [IRC § 6325(b)(1)]
The IRS may discharge a lien on a piece of property to allow your client to sell the property if your client owns other property worth twice his or her tax debt. The fair market value of the remaining, unsold properties must be at least double the sum of:
The unsatisfied tax liability secured by the lien
The encumbrances on remaining properties
Example: Your client wants to sell property worth $50,000 and has a debt and expenses of sale of $45,000. The buyer wants clear title to the property being purchased. Your client owns other property with a fair market value of $300,000 and associated loans of $40,000. He owes the IRS $80,000 in back taxes. He requests lien discharge on the first property under IRC § 6325(b)(1) because the second property is worth more than twice the debt to the IRS ($300,000/$80,000 + $40,000).
Appeal a denied request for lien discharge
If the IRS denies lien discharge, an appeal with supporting documents may reverse the IRS’ decision.
Example: The IRS denies your client's request for lien discharge under IRC § 6325(b)(2)(A). The IRS is paid the remaining proceeds of the property sale but argues that the sale is not at fair market value. Your client files Form 9423, Collection Appeal Request, to the Advisory Group, with two independent appraisals proving the property's value.
Process for requesting lien discharge
The IRS files a federal tax lien on an unpaid tax balance at your client's local courthouse.
Your client is selling property and meets one of the following conditions:
Owns other property valued at twice the amount of lien plus encumbrances
Sells property that will partially pay the amount of the lien
Short selling property; government interest has no value
Sale of property will pay tax lien in full (escrow agreement)
Owns property jointly with someone who has a tax lien
Prepare the Form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien, with all of the required attachments.
Submit the lien discharge request to the IRS Advisory Group.
The IRS Advisory Group examines the complete application to determine whether it is in the best interest of the government to issue a certificate of lien discharge.
The IRS issues a decision. If the IRS approves the discharge request, it issues a conditional commitment letter for a certificate of discharge. When the government's interest is valueless, the IRS issues a certificate of discharge.
If the IRS does not approve the discharge request, follow up immediately with the Advisory Group manager and, if necessary, file an appeal via Form 9423, Collection Appeal Request.
The IRS will issue a certificate of discharge when all conditions are met, including payment received and cleared and other conditions dictated on the conditional commitment letter.
Advantages of lien discharge
Removes lien from your client's property
Your client only has to pay the IRS the remaining proceeds from sale, if any
An injured third party can request lien discharge when transferring property
Disadvantages of lien discharge
Your client's past compliance history may affect IRS decision to discharge
The IRS may require extensive review of the property for your client to qualify
When the IRS receives your client's application for lien discharge, it will research your client's IRS account and examine the information and documents submitted with the application. This can entail conversations with the appraiser, title company and others associated with the real estate transaction. The IRS may request other documents and information, such as:
Explanation of closing cost amounts
Relationship of the parties involved in the transaction
The IRS processing time for a lien discharge request is 30 days, but it may take up to 90 days depending on the volume of applications being processed.
If your client owes after the discharge
If your client will have unpaid tax balances after the property sale, propose a collection alternative when submitting the application for lien discharge.
When your client has paid the tax in full or the IRS receives another type of security, the IRS will release the lien. This removes the lien from your client’s property, but the lien will stay on your client’s credit report for about seven years.
When to request a lien release
Request lien release when one of the following conditions is met:
Tax balance has already been paid in full
Tax balance discharged in bankruptcy
Surety bond provided to the IRS
Taxes owed will be paid in full
Collection statute expired
Paid balance but did not receive a certificate of release [IRC § 6325(a)(1)]
The IRS will release a lien if the tax balance has already been paid in full but your client did not receive a certificate of release. However, lien withdrawal may be a better option in this situation because withdrawal eliminates the lien filing from your client's credit report.
Example: Your client completed an IRS payment plan for 2007-2008 Form 1040 and no longer owes any balances on these years. Three months later, he applies for a car loan and learns that the lien has not been released. He requests a lien release.
Tax balances discharged in bankruptcy [IRC § 6325(a)(1)]
The IRS will release a lien if your client's balances were discharged in bankruptcy.
Example: Your client files for Chapter 7 bankruptcy and includes old unpaid income taxes in his debts. The judge discharges his tax debts under Chapter 7 bankruptcy relief. Your client requests a certificate of release on the debts discharged.
Provide a surety bond [IRC § 6325(a)(2)]
The IRS may release a lien if your client applies for and is granted a surety bond to offer to the IRS in lieu of payment. However, lien withdrawal could be a better option in this situation because it eliminates the lien filing from your client's credit report.
Example: Your client owes the IRS $36,000 and can't borrow the funds to pay off the lien. He applies for a surety bond with a U.S. Treasury-approved surety company. He is granted the bond, which he offers ot the IRS in lieu of payment, and applies for lien release.
Pay taxes owed in full, including accrued penalties and interest [IRC § 6325(a)(1)]
The IRS will release a lien when your client pays off the full balance due. However, lien withdrawal may be a better option in this situation because it eliminates the lien filing from your client's credit report.
Example: Your client calls the IRS to find out the payoff amount for his lien. He obtains certified funds from his bank to pay off the balance due in full. Your client provides payment, along with specific instructions on how the IRS should apply the payment, and requests lien release.
Collection statute of limitations expiration [IRC § 6325(a)(1)]
The IRS will release a lien when the collection statute on your client's lien has expired.
Example: Your client owed balances from 1996 that expired on April 15, 2007. On that date, she requests a lien release.
Appeal the denial of a lien release
If the IRS denies lien release, an appeal with supporting documents may reverse the IRS’ decision.
Example: The IRS denies your client's request for a lien release, stating that the tax has not been paid. Your client files an appeal with a manager, including a canceled check and a date-stamped letter showing that the IRS accepted payment for the tax year. If the manager does not approve the request, your client can file a Form 9423, Collection Appeal Request, with the manager immediately.
Process for requesting lien release
Submit a request for lien release if:
Your client already paid the lien but has not received a certificate of release.
Your client wants to pay the lien amount in full.
Your client's unpaid balances were discharged in bankruptcy.
Your client wants to provide a surety bond instead of payment.
The collection statute has expired on the unpaid balances.
If your client pays the tax in full, request a copy of the lien release from the Centralized Lien Processing Unit. For other lien release requests, contact the IRS Advisory Group.
The IRS investigates your client's IRS account.
Wait 15 to 30 days for a determination.
The IRS issues a determination. If the IRS approves the request, it will issue a certificate of release.
If the IRS denies the request, follow up immediately with the Centralized Lien Processing Unit/Advisory Group, and, if necessary, file Form 9423, Collection Appeal Request.
Advantages of lien release
Can be completed quickly with full payment
Disadvantages of lien release
Full payment required for quick release
Lien remains on credit report until credit agency removes it (typically seven years)
Lien release takes about 30 days after the tax liability is paid in full. Paying by certified or cashier's check, or postal or bank money order expedites the release. In some emergency situations, a local IRS office will issue a lien release immediately with proof of payment.
Lien release and credit rating
A lien release will not remove the tax lien from your client's credit report. If your client pays the tax in full, he or she must request a lien withdrawal to have the lien removed from his or her credit history. If not, the IRS will issue only the required certificate of release, and the lien will remain on your client's credit report for at least seven years.
Amount listed on lien is not payoff amount
The amount listed in column (f) of Form 668Y, Notice of Federal Tax Lien, represents the amount due as of the date of the lien. To release the lien, your client must satisfy the current payoff amount. You can request the current payoff or the amount for a future date from the IRS.
Lien subrogation is a substitution of one person/entity in the place of another concerning property rights.
When to use subrogation
A creditor will use subrogation to dispute lien priority if there is an issue under IRC § 6323(j)(2).
Example: Bank A holds a first lien of $10,000, the IRS holds a federal tax lien of $25,000, and Bank B holds a third lien of $30,000 on the taxpayer's property. Bank B pays the entire amount of the first lien, replacing Bank A. If the property sells for $50,000 and Bank B meets the local subrogation laws, then Bank B will receive the first $10,000 of the proceeds of the sale, the IRS will receive the next $25,000 and Bank B will receive the last $15,000.
There is no universal definition of subrogation under state law. If a lienor claims right to subrogation, the state determines whether the lienor has a right to subrogation under that state's law.
Your client can appeal a lien filing, as well the outcomes of alternative solutions.
Appealing a lien filing
Your client receives Letter 3172, Notice of Federal Tax Lien Filing and Your Rights to a Hearing under IRC 6320, and Form 668Y, Notice of Federal Tax Lien.
File an appropriate appeal with the IRS and offer a collection alternative and/or dispute the tax liability associated with the lien.
File for a Collection Due Process (CDP) hearing within 30 days of the lien filing.
File for an Equivalent Hearing (EH) between 30 days and one year of the lien filing. A CDP hearing is not an option 30 days after the lien is filed.
File for a Collection Appeals Program (CAP) hearing if the IRS has decided to file a lien but has not yet filed it, or if it has been more than one year after the lien was filed. An EH is no longer an option one year after the lien is filed.
Conduct the appeals hearing with the IRS.
If you don’t reach an agreement with the IRS in a CDP hearing, consider appealing to the courts.
If you don’t reach an agreement with the IRS in an EH or a CAP hearing, the appeals decision is final. Consider other collection alternatives or dispute the tax liability.
Advantages of appealing a lien filing
Allows an independent party to see your client’s specific circumstances
Disadvantages of appealing a lien filing
Your client must offer a viable dispute against or alternative to the lien; this may be costly
Could take 120 days or longer
Appealing the denial of a lien subordination, withdrawal, discharge or release
The IRS sends a letter denying your client’s request for lien subordination, withdrawal, discharge or release.
Contact the IRS Advisory Group manager immediately to request reconsideration.
If the manager doesn't approve your request, file Form 9423, Collection Appeal Request, within 30 days of the date on the denial letter.
With Form 9423, submit reason(s) your client disagrees with the denial and all supporting documents that were part of the original request.
Submit Form 9423 to the IRS address shown on the denial letter.
Timeliness of appeal request
Your client has 30 days from the date of the Letter 3172, Notice of Federal Tax Lien Filing and Your Rights to a Hearing under IRC 6320, and Form 668Y, Notice of Federal Tax Lien, to request a Collection Due Process (CDP) hearing. After 30 days, your client can request an Equivalent Hearing (EH). The CDP hearing gives your client further appeal rights; the EH decision is final.
Expected timeline varies
The IRS processing time for a CDP hearing or an Equivalent Hearing is normally 30 days. The processing period for a Collection Appeals Program hearing is normally five days. An Appeals officer will schedule an appointment to review the case.
Denied hearing request
The IRS may deny a hearing request if:
The IRS deems the request frivolous.
The IRS determines that the request is being used to delay or impede the collection of the tax.
If the IRS determines that a request is frivolous or is being used to delay or impede the administration of federal tax laws, your client has 30 days to provide a valid reason for or withdraw the hearing request. Your client must amend or withdraw the request in writing to avoid a penalty of $5,000 (IRM 5.1.9.3.16).
1. Research Client Account
Correct the balance, if needed
Verify lien was issued according to IRS procedures
Research Client Account
What you will do in this phase
File authorization form(s) with the IRS, if needed, such as Form 2848, Power of Attorney and Declaration of Representative, and/or Form 8821, Tax Information Authorization, to research your client’s IRS account.
Obtain client account information by contacting the IRS. Determine which tax years and balances are subject to a federal tax lien. You may need to determine your client’s assessed balance and total balance owed for each tax year, obtain IRS Account Transcripts for all tax periods with a balance due or request information such as the collection statute expiration date. If your client can pay the liability in full, request the pay-off balance as of the date the IRS will receive payment.
Verify balance owed. Determine how the IRS calculated the balance owed and confirm that the balance is correct.
Correct the balance, if needed. You may need to file or amend a tax return or request audit reconsideration to correct the tax liability. These steps, if appropriate, could reduce or eliminate the balance due.
Verify that the lien was issued according to IRS procedures. Unless the IRS has reason to believe that collection of the taxes due is in jeopardy (such as if taxpayer is trying to conceal assets or leave the country to avoid paying taxes), the IRS should follow due process.
Practice tips and best practices
To receive account transcripts and tax account information quickly, call the Practitioner Priority Service at (866) 860-4259. Ask the IRS representative to fax you transcripts, if needed.
To obtain the pay-off balance for a lien, call the National Lien Unit at (800) 913-6050.
2. Determine Lien Solution
Send payment to IRS, if possible
Discuss lien options with your client
Appeal a proposed lien filing
Appeal a lien that the IRS has already filed
Obtain documentation from your client
Determine Lien Solution
Send payment to the IRS, if your client is able to pay the balance due in full.
Discuss lien options with your client. Your client may choose to request lien release, withdrawal, subordination or discharge.
Appeal a proposed lien filing, if appropriate, by completing Form 9423, Collection Appeal Request.
Appeal a lien that the IRS has already filed, if appropriate, by completing Form 12153, Request for a Collection Due Process or Equivalent Hearing.
Obtain documentation from your client required to request lien relief. Each lien relief application lists the documentation that you must attach.
If your client sent payment of the tax liability to the IRS, call the IRS to confirm that it received the payment and correctly posted it to your client’s account.
If your client is unable to pay the balance due in full, suggest that your client request a guaranteed or streamlined installment agreement (IA) to avoid the filing of a federal tax lien, if the balance due is $50,000 or less. You can call the IRS or use e-services or the Online Payment Application System to request the IA.
If your client can show that the filing of a federal tax lien will actually make it more difficult for him or her to pay the taxes due, your client can request a Collection Appeal Program hearing. Complete Form 9423, Collection Appeal Request, to request an appeal hearing and present an alternate solution. The IRS does not consider the fact that a lien will affect your client’s credit rating to be sufficient evidence that the lien is impeding payment of the taxes due. The Appeals officer’s decision is final and cannot be appealed in tax court. In practice, Appeals officers typically maintain that filing an NFTL is in the best interest of the government.
If the IRS filed the tax lien in error, your client should request that the lien be withdrawn, per IRC §6326.
If the balance due was discharged in bankruptcy proceedings, your client can request a certificate of release. This is different from a certificate of withdrawal, which is only available if your client pays the balance in full.
If the IRS’ tax lien is valid, use the “Lien Relief Qualification Worksheet” to help you determine what type of lien relief applies to your client’s situation.
Your client may want to request a certificate of release if
Your client has paid the tax balance in full
The IRS has accepted an offer in compromise
The IRS has accepted a bond, per IRC §6325(a) (2)
The IRS has granted innocent spouse relief. per IRC § 6015
The IRS discharged the balance due in bankruptcy proceedings more than 30 days ago
A third party does not accept that the lien self-releases after the collection statute expiration date and requires that your client provide a certificate of release
Your client may want to request a certificate of withdrawal if
Your client has paid the balance due in full
Your client has set up a direct debit installment agreement for a balance of $25,000 or less and three payments have successfully cleared
The IRS issued the lien in error
Withdrawal of the lien would facilitate collection
Your client may want to request a certificate of subordination if he or she wants to refinance a loan or obtain a line of credit to pay all or part of the tax balance due.
Your client may want to request a certificate of discharge if he or she wants to sell or purchase property that has a lien attached to it. The IRS will only allow your client to sell the property if your client remits the proceeds (up to the total balance due) to the IRS or if sale of the property will facilitate payment of the tax. The IRS may also grant a certificate of discharge if your client will use funds held in escrow to pay the tax liability or if your client purchased property with a lien attached and is able to satisfy the lien.
3. Request Lien Solution
Complete lien request form and gather documentation
Request lien release, withdrawal , subordination or discharge
Request manager’s conference, if necessary
Request Lien Solution
Complete appropriate lien request form and gather all required documentation. Each lien relief option requires different documentation.
Request a certificate of release by writing to the IRS. Explain your client’s grounds for requesting lien release and attach any supporting documentation.
Request a lien withdrawal either by mail, if your client has paid the balance due in full, or by filing Form 12277, Application for Withdrawal of a Federal Tax Lien, if
Your client has set up a direct debit installment agreement for a balance of $25,000 or less
The Taxpayer Advocate Service believes withdrawal is in the best interest of the taxpayer and the government.
Request a certificate of lien subordination by filing Form 14134, Application for Certificate of Subordination of Federal Tax Lien, if your client wants to refinance or obtain a line of credit to pay the taxes due.
Request a certificate of discharge by filing Form 14135, Application for Certificate of Discharge of Federal Tax Lien, if your client wants to sell or purchase property with a tax lien attached. The IRS will only grant a certificate of discharge when the proceeds will be used to pay the tax balance due or when the sale will facilitate payment of the tax.
Request a conference with a manager if the IRS denies your client’s lien relief request. You must request a conference with the employee’s manager prior to filing a request for an appeals hearing.
You will need to file Form 2848, Power of Attorney and Declaration of Representative, to request lien relief for your client.
To dispute the proposed filing of a tax lien, your client may want to consider obtaining a surety bond or proposing a guaranteed or streamlined installment agreement with the IRS.
When obtaining a surety bond for lien release, make sure the Department of Treasury lists the company from which your client obtains the bond as a certified company. See Circular 570 at www.fms.treas.gov for a listing of certified companies.
If your client’s balance due is $50,000 or less, your client can request a guaranteed or streamlined installment agreement by calling the IRS or using the Online Payment Agreement or IRS e-services.
Request lien withdrawal rather than lien release if the balance due has been paid in full. A lien release does not remove the lien from your client’s credit report, but a lien withdrawal does.
When requesting a lien discharge or subordination, send the application and request to the IRS at least 45 days before the sale or loan settlement meeting. If the IRS does not receive the request in time, the sale or loan may be delayed.
If your client is trying to avoid foreclosure, include this on the request you send to the IRS. The IRS will try to process the request more quickly.
The IRS usually takes about 15 days to process a request for lien release. However, if you attach a copy of the cancelled check for payment or if you include a certified check for the full amount with the release request, the IRS will issue an immediate release.
When your client requests lien discharge, the IRS requires a professional appraisal of the property. The IRS does not require a professional appraisal before granting lien subordination.
Write your client’s name and taxpayer identification number on each page that you provide to the IRS. Number each page to help organize the information you provide to the IRS.
Only send copies of your client’s documents to the IRS. The IRS will not return any original documents you send.
Make a copy of the entire package that you send to the IRS. You may need to resend the package or refer to the package at a later date.
If you are mailing information to the IRS, consider requesting a return receipt to verify that the IRS receives the package.
If possible, fax your client’s documents to the IRS for a quicker response.
4. Finalize or Appeal
Follow up with the IRS and your client
Request a conference with the Collection manager, if necessary
Request a CAP proceeding or a CDP hearing, if necessary
Finalize the engagement
Finalize or Appeal Denial of Lien Relief
Follow up with the IRS regarding any documentation you submitted, if applicable.
Follow up with your client to ensure that he or she received lien relief.
If your client disagrees with the IRS’ decision, your client must request a conference with the Collection function manager before requesting a Collection Appeals Program (CAP) hearing. If your client does not resolve the disagreement with the Collection manager, your client may submit a written request for appeals consideration with the IRS Office of Appeals.
Request a CAP hearing to appeal a lien that the IRS has not yet filed. Your client must be able to show that filing the tax lien will impede the collection of the taxes due. Once the Office of Appeals makes a decision regarding your client’s case, that decision is binding on both your client and the IRS. You cannot obtain judicial review of a decision following a CAP hearing.
Request a Collection Due Process (CDP) hearing to appeal a lien that the IRS has already filed. Complete Form 9423, Collection Appeal Request. You will need to attach supporting documentation to substantiate your client’s request as well as propose a collection alternative, such as an installment agreement, to the IRS. If the Appeals officer denies the request, your client will be able to appeal the denial in U.S. Tax Court.
Finalize the engagement and communicate the IRS’ final determination to your client.
Call the IRS if you do not hear from the IRS within 30 days of the date you mailed a written request.
Ensure that a collection hold remains on your client’s account throughout the process.
Your client may request judicial review of a CDP determination by petitioning the United States Tax Court. At the conclusion of a CDP hearing, the IRS Office of Appeals will issue a determination letter. If your client does not agree with the determination, your client may file a petition with the U.S. Tax Court within the time period specified in the determination letter.
Takes less than three hours of billable work to resolve
Often can be resolved with the IRS on the same day the issue arises
Less experienced staff can perform most of the work
Requires the least manager/partner involvement
Takes three to eight hours of billable work to resolve
Usually requires one to three months to fully resolve with the IRS (often waiting on written correspondence from the IRS)
Experienced staff members needed to perform the work
Requires more manager/partner involvement
Takes more than eight hours of billable work to resolve
Usually requires three or more months to fully resolve with the IRS (often waiting on written correspondence from the IRS)
Requires the most manager/partner involvement
Standard billable hours
(Simple Issue)
(Moderate Issue)
(Complex Issue)
Typically comprised of approximately 90% staff time and 10% manager/partner time Typically comprised of approximately 75% staff time and 25% manager/partner time Typically comprised of approximately 50% staff time and 50% manager/partner time
Research has shown that most tax practitioners bill for less than one half of the time spent on post-filing issues. Allocating work to staff with lower billable rates is key to increasing realization (utilizing your staff to maximize profits).
See more on authorizations
Authorizations to obtain before contacting the IRS
Most clients do not want to correspond with the IRS. Therefore, when client issues arise, tax practitioners often need to obtain the appropriate authorization to correspond with the IRS. To do this, file Form 2848, Form 8821 and/or Form 56 with the IRS. Your client must sign these forms, authorizing you to obtain IRS account information and/or speak on behalf of your client.
Allows authorized individuals to represent taxpayers before the IRS. Common authorized individuals include CPAs, enrolled agents and attorneys.
IRS dispute resolution, such as appealing an IRS action or decision
Requesting penalty abatement over the phone
Obtaining client IRS account transcripts from e-services
Minimizing the need for your client to interact directly with IRS personnel
All activities for which a Form 8821 might be used
Allows authorized individuals or firms to obtain taxpayer information from the IRS without incurring the liability associated with taking power of attorney (client representation)
Obtaining copies of notices the IRS sends to a client at the same time the client receives notices
Utilizing staff with a lower billable rate to perform non-representation tasks, such as:
Conducting client account research over the phone, such as confirming payments, terms of finalized agreements and/or adjustments
Obtaining client IRS account transcripts by requesting them over the phone
Notifies the IRS of the creation or termination of a fiduciary relationship under IRC § 6903, Notice of fiduciary relationship. Form 56 also allows you to give notice of qualification under IRC § 6036, Notice of qualification as executor or receiver.
A fiduciary may be an executor, trustee, guardian, administrator, receiver or conservator.
This authorization gives the designee all of the powers, rights, duties and privileges of the person or entity who issued the designation.
What is IRS client account research?
Every taxpayer has an account with the IRS. Each taxpayer's account contains information including, but not limited to:
Tax return information from filed returns
Information statements, such as W-2s or 1099s posted to the taxpayer's identification number (Social Security number or employer identification number)
Payments made by the taxpayer
Assessments the IRS has made to the taxpayer (including tax, interest and penalties)
You will often need to research your client's IRS account to effectively respond to an IRS notice or to resolve an IRS issue. For example, you may need to determine to which tax period the IRS credited a payment or you may need to determine the type and amount of penalties the IRS has assessed to your client's account for each tax period. Obtaining transcripts online using IRS e-services or by calling the IRS is an effective way to research your client's IRS account.
Account transcripts: Show information on the financial status of the account, such as payments made on the account, penalty assessments and adjustments. Account transcripts are available for most returns.
Wage and income transcripts (Form W-2, Form 1099 series, Form 1098 series or Form 5498 series transcripts): Show data from Form W-2, Form 1099 series, Form 1098 series or Form 5498 series; the IRS may be able to provide this transcript information for up to 10 years. The IRS often refers to these transcripts as "wage and income transcripts."
Return transcripts (Form 1040 series, Form 1065, Form 1120, Form 1120A, Form 1120H, Form 1120L and Form 1120S): Show information on the line items of a tax return filed with the IRS; available for the current year and returns processed during the prior three processing years.
An engagement agreement defines the legal relationship between a professional firm and a client. An engagement letter states the terms and conditions of the engagement, addressing the scope of the engagement and the terms of compensation for the professional firm.
Relevant IRS contacts
See more on appeals
There are two types of administrative appeals within the IRS:
Informal: The determination is not subject to judicial review (i.e., not subject to appeal to the courts).
Formal: The determination is subject to judicial review.
Examples of informal appeal rights include:
IRS manager or supervisor review of an IRS employee determination. You can request a manager review in most situations, such as:
Proposed examination deficiencies
Rejected installment agreements
Proposed penalty abatement rejections
Certain IRS appeals officer or appeals settlement officer reviews of IRS employee determinations.
The Collection Appeals Program, including equivalent hearings on collection issues such as liens, levies and denials/terminations of installment agreements
Post-assessment penalty abatement, CP2000 (underreporter) and substitute for return determinations
Fast-track mediation to resolve disputes on small business/self-employment issues such as audits, offers in compromise, trust fund recovery penalties and collection actions
Fast-track settlement to expedite settling specific audit and collection issues while your client is still under audit or collection for other issues
Examples of formal appeal rights include:
Certain IRS appeals office determinations and settlements
Collection Due Process hearings on issues pertaining to filing of liens and levies
Audit adjustment determinations from a 30-day letter
You can appeal certain tax disputes to the federal courts in the following three venues:
U.S. Tax Court does not require payment before litigation can begin. U.S. Tax Court allows your client's case to be heard in front of a judge, who is typically a tax subject matter expert. U.S. Tax Court hears the following types of cases:
Deficiency disputes for income, estate, gift or certain excise taxes. U.S. Tax Court doesn't hear employment tax issues.
Disputes resulting from unresolved Collection Due Process hearings (e.g., Collection Appeals Program hearing held in response to the filing of a lien or levy)
Disputes about worker classification determinations (e.g., Form SS-8 determinations)
Denials of innocent spouse relief
U.S. District Court U.S. District Court hears most types of cases. Your client must pay the balance before litigation can begin. Your client will typically pay the balance owed; file Form 843, Claim for Refund and Request for Abatement, to request a refund; and attach a statement requesting that the claim be immediately disallowed. District Court allows the case to be heard in front of a jury.
U.S. Court of Federal Claims U.S. Court of Federal Claims hears most types of cases. Your client must pay the balance before litigation can begin. Your client will typically pay the balance owed; file Form 843, Claim for Refund and Request for Abatement, to request a refund; and attach a statement requesting that the claim be immediately disallowed.
Preview only. How do I use the resources?
The resources listed on this page are in a preview-only mode. To use these resources for a client, click the blue “Resolve this issue” button in the upper-right corner of this page. You will select a client and an engagement, and then you can begin selecting and using the resources for that client.
Request Lien Withdrawal With Form 12277
Request withdrawal of a federal tax lien from your client’s public records. File Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien, when any one of the following criteria applies:
The lien was not filed according to IRS procedures
Your client entered into an installment agreement that did not specify that the IRS could file a tax lien
Your client is in a direct debit installment agreement and three payments have successfully cleared
Lien withdrawal will facilitate the collection of the taxes due
Your client or the Taxpayer Advocate Service believes that lien withdrawal is in the best interest of both the taxpayer and the government
Assemble the request for lien withdrawal with Form 12277 package as follows:
Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien
“Attachment to Form 12277”, if applicable
Copy of Form 668(Y), Notice of Federal Tax Lien, if available
Other supporting documents that substantiate your client’s request for withdrawal of the lien
Copy of Form 2848, Power of Attorney and Declaration of Representative, if you are your client’s power of attorney representative
Provide a detailed explanation of the events or circumstances causing your client to request lien withdrawal.
Attach a list of any credit reporting agencies, financial institutions and/or other creditors to whom your client wants the IRS to send a copy of the lien withdrawal.
Mail the request to the IRS office assigned to your client’s account, if applicable or to the IRS to the attention of the Advisory Group Manager. The address of the IRS office for the area where your client lives can be found in IRS Publication 4235, Advisory Group Addresses.
Form 12277, App for Withdrawal of Notice of Federal Tax Lien
Request withdrawal of a federal tax lien to remove a lien from your client’s public record. Use Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien, when:
The Notice of Federal Tax Lien was not filed in accordance with IRS procedures.
Your client has entered into an installment agreement to satisfy the liability for which the lien was filed and the agreement did not specify that the IRS could file a tax lien.
Your client is in a direct debit installment agreement for a balance due of $25,000 or less and three or more payments successfully cleared.
Lien withdrawal will facilitate tax collection.
Your client or the Taxpayer Advocate Service believes that lien withdrawal is in the best interest of both the taxpayer and the government.
Mail the request to the IRS office assigned to your client’s account, if applicable, or to the IRS to the attention of the Advisory Group Manager. The address of the IRS office for the area where your client lives can be found in IRS Publication 4235, Advisory Group Addresses.
Attachment to Form 12277
Attach to Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien, to provide a detailed explanation of the events or circumstances causing your client to request lien withdrawal.
Request Lien Withdrawal With Full Payment
Request withdrawal of a federal tax lien from your client’s public records when your client has either paid the taxes due in full or is enclosing payment for the total taxes due with the withdrawal request.
Assemble the request for lien withdrawal with full payment package as follows:
“Request a Lien Withdrawal With Full Payment Cover Letter”
Attach a copy of the canceled check for the final payment, if your client has paid the taxes due in full, or
Attach a check to pay the total taxes due, based on the payoff balance you obtained from the IRS
Call the IRS at (800) 913-6050 to request the payoff balance for a lien withdrawal.
If you are enclosing a check to pay the balance due in full, it is recommended that you send a certified check. The IRS will wait at least 15 days before processing the lien withdrawal to allow a regular check to clear.
Do not include Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien, with this request.
Request a Lien Withdrawal With Full Payment Cover Letter
Request withdrawal of a federal tax lien to remove the lien from your client’s public records. Request lien withdrawal when your client has paid the tax in full or is sending full payment of the taxes due.
Call the IRS at (800) 913-6050 to request the lien payoff balance required for lien withdrawal.
You will need a valid Form 2848, Power of Attorney and Declaration of Representative, to request lien withdrawal on behalf of your client. Alternately, you can have your client sign this letter.
Attach a copy of Form 668(Y), Notice of Federal Tax Lien, if available.
Attach a list of creditors to whom your client would like the IRS to send a copy of the notice of withdrawal, if applicable.
If your client has paid the tax liability in full, attach a copy of the cancelled check or other proof of payment.
If you are attaching payment in full to the letter, it is recommended that your client obtain a certified check. The IRS usually takes about 15 days to process a request for lien release.
Request a Certificate of Discharge of Property from a Federal Tax Lien
Request that the IRS discharge a federal tax lien to enable your client to sell or purchase property with a lien attached. You may request a lien discharge if your client:
Wants to sell property to pay the taxes due
Wants to sell property in a short sale to facilitate the payment of tax
Has other property worth at least double the amount of the liability of the federal tax lien plus other encumbrances senior to the lien(s)
Has proceeds from a property sale that are held in escrow and are subject to the lien
Has purchased property that is subject to a lien
Assemble the request for a certificate of discharge of property from a federal tax lien package as follows:
“Attachment to Form 14135”, if applicable
Legible copy of the deed or title showing the legal description of the property
Professional appraisal by a disinterested third party
County valuation of property
Informal valuation of property by a disinterested third party, such as a real estate agent
Proposed selling price for property being sold at an auction
Copy of sales contract or purchase agreement or description of how and when taxpayer will no longer have an interest in the property
Copy of current title report or list of encumbrances senior to the federal tax lien
Copy of proposed closing statement, such as HUD-1, or an itemized list of proposed costs, commission and expenses of transfer or sale of the property
Copy of escrow agreement, if applying for lien discharge under IRC Section 6325(b)(3)
Form 12451, Request for Relocation Expense Allowance, if applicable
Other supporting documents substantiating your client’s request for lien discharge
Call the IRS at (800) 913-6050 to request the lien payoff balance.
Indicate whether your client anticipates mortgage foreclosure. The IRS may try to process the application more quickly.
Submit the request at least 45 days before the date when the certificate of discharge is needed.
Request a certificate of discharge of property from a federal tax lien so that your client may purchase or sell property. The IRS may agree to a discharge when:
Your client furnishes a deposit or bond equal to the value of the government’s interest.
Your client gives the government an amount equal to the value of its interest.
The interest the United States holds in the property to be discharged has no value.
Proceeds from a property sale that are held in escrow and are subject to a federal tax lien
Your client has other property worth at least double the amount of the liability of the federal tax lien plus other encumbrances senior to the lien(s).
Complete the Section 16 waiver if your client is the property owner but is not liable for the tax debt.
When your client requests lien discharge, the IRS requires a professional appraisal of the property.
Attach a copy of each document listed on the form.
Attachment to Form 14135
Explain your client’s unusual circumstances regarding a request for discharge of property from a federal tax lien.
Form 12451, Request for Relocation Expenses Allowance
Use this document when:
Your client is filing Form 14135, Application for Certificate of Discharge Federal Tax Lien, and requesting an allowance for relocation expenses in connection with the sale of your client’s principal residence.
You will need to explain the financial circumstances that prevent your client from paying the relocation expenses. Attach supporting documentation.
Request a Certificate of Subordination of a Federal Tax Lien
Request that the IRS make a federal tax lien secondary to a non-IRS lien so that your client can refinance a loan or obtain a home equity line of credit to pay all or some of his or her tax balance. Select this option when your client wishes to:
Reduce the rate or term of a loan
Assemble the request for certificate of subordination of a federal tax lien package as follows:
Form 14134, Application for Certificate of Subordination of a Federal Tax Lien
“Attachment to Form 14134,” if applicable
Professional appraisal by a disinterested third party or one of the following:
Copy of proposed loan agreement, if available
Other supporting documents that substantiate your client’s request for lien discharge
Call the IRS at (800) 913-6050 to request the lien payoff balance. The IRS may try to process the application more quickly if your client anticipates a mortgage foreclosure.
Form 14134, App for Certificate of Subordination of Federal Tax Lien
Request lien subordination so that your client can refinance a loan or obtain a home equity line of credit to pay his or her tax liability.
If the lien subordination will not enable your client to pay the taxes due in full, attach a statement describing how allowing the subordination will increase the amount the government will ultimately collect from your client and how the subordination will facilitate collection of the balance due.
When your client requests lien subordination, the IRS does not require a professional appraisal, but does require a valuation of the property.
Attachment to Form 14134
Provide additional information relevant to your client’s request for lien subordination.
Indicate on Form 14134 that you are attaching additional information.
Request a Certificate of Release for a Federal Tax Lien
Request a certificate of release for a federal tax lien when the IRS did not release the lien as required or when your client needs a certificate of release to prove to a third party that the lien has been released. Your client might need a certificate of release when:
The IRS did not release a lien that your client paid in full or that is no longer enforceable as a matter of law, such as if the collection statute has expired, an offer in compromise has been paid in full or a balance was discharged in bankruptcy).
Your client obtains a surety bond to secure payment of the tax balance due
The IRS erroneously filed a Notice of Federal Tax Lien
Assemble the request for certificate of release of a federal tax lien package as follows:
“Request for Certificate of Release for a Federal Tax Lien Cover Letter”
Copy of Form 668(Y), Notice of Federal Tax Lien
A list of any credit reporting agencies, financial institutions and/or other creditors to whom your client wants the IRS to send a copy of the certificate of lien release, if the IRS filed the lien in error
Other supporting documents that substantiate your client’s request for a lien release
Do not request a lien release until 30 days have passed after the date the lien should have been released
If the tax balance due was not paid in full, such as if the debt was discharged in bankruptcy, an offer in compromise has been paid in full or the collection statute date has expired) the IRS will not issue a Certificate of Lien Withdrawal, but will issue a Certificate of Lien Release
If your client needs the IRS to file the lien release immediately, the IRS will require your client to file the request for lien release and pay the recording fee for filing the certificate of release
Mail the request for certificate of release to the attention of the Technical Services Advisory Group Manager. The address of the IRS office for the area where your client lives can be found in IRS Publication 4235, Advisory Group Addresses.
Request for Certificate of Release for a Federal Tax Lien Cover Letter
Request lien release because your client’s tax liability has been or will be paid in full. You can request lien release when:
Your client has paid the tax liability in full
You client is paying the tax liability in full with this letter
Your client’s liability was discharged in bankruptcy
Your client is supplying a surety bond for the total balance due
The collection statute expiration date has passed
You will need a valid Form 2848, Power of Attorney and Declaration of Representative, to request lien release on behalf of your client. Alternately, you can have your client sign the letter.
Your client will usually have to wait 45 days after paying the balance due in full to obtain a certificate of lien release. However, the IRS will issue an immediate release if you present a copy of the cancelled check or if the check is certified.
Dispute Proposed Filing of a Federal Tax Lien (CAP Hearing)
Request a Collection Appeal Program (CAP) hearing when the IRS is proposing the filing of a lien. Request a CAP hearing in any of the following situations:
Your client received a notice of the IRS’ intent to file a federal tax lien
The IRS denied your client lien release, withdrawal, discharge or subordination
The IRS filed a Notice of Federal Tax Lien against your client more than one year plus five days ago.
Assemble the dispute proposed filing of a federal tax lien package as follows:
Collection Appeals Program Request Cover Letter
“Form 9423, Collection Appeal Request”
“Attachment to Form 9423,” if applicable
Other supporting documents that substantiate your client’s appeal request
You must request a conference with the manager of the IRS employee who denied your client’s request for lien relief before requesting a CAP hearing.
A CAP hearing is a less formal review than a Collection Due Process hearing; however, under a CAP hearing, the decision is final and cannot be appealed in court.
Collection Appeals Program Request Cover Letter (to the IRS)
Use this letter to:
Request a Collection Appeals Program (CAP) hearing regarding:
A proposed filing of a federal tax lien
Denial of lien withdrawal, subordination or discharge
Termination/modification or proposed termination/modification of an installment agreement
Issuance of a levy or property seizure
This document serves as a cover letter for Form 9423, Collection Appeal Request, which provides further clarification regarding this appeal option.
A CAP hearing is a less formal review than a Collection Due Process (CDP) hearing; however, under a CAP hearing, the decision is final and cannot be appealed in court.
Use Form 9423 to:
Attachment to Form 9423
Attach to Form 9423, Collection Appeal Request, when you need additional space to explain why your client disagrees with an IRS collection action and how your client proposes to resolve the issue.
Appeal the Filing of a Notice of Federal Tax Lien (CDP Hearing)
Request a Collection Due Process (CDP) hearing when the IRS files a Notice of Federal Tax Lien against your client.
Assemble the appeal the filing of a Notice of Federal Tax Lien package as follows:
“ Collection Due Process Cover Letter”
“Attachment to Form 12153,” if applicable
Your client must request a CDP hearing within the timeframe outlined on the lien notice. If your client misses the deadline to request a CDP hearing, your client may request an equivalent hearing within one year plus five days of the lien filing.
Mail your appeal request package to the address shown on the lien notice. You may also fax the package to the IRS. Call the phone number on the notice to request the fax number. Do not mail this package directly to the IRS Office of Appeals. Doing so may result in the request being considered an untimely filed request.
If your client filed the request for a CDP hearing within 30 days of the date on the lien notice, your client can appeal the Appeals officer’s decision by filing a petition in U.S. Tax Court.
Collection Due Process Hearing Request Cover Letter
Request a collection due process (CDP) or equivalent hearing if your client receives any of the following notices:
“Notice of Federal Tax Lien Filing and Your Right to a Hearing”
“Notice of Intent to Levy and Your Right to a Hearing”
“Notice of Jeopardy Levy and Right of Appeal”
“Notice of Levy Upon Your State Tax Refund”
“Notice of Levy and Notice of Your Right to a Hearing”
This document serves as a cover letter for Form 12153, Request for a Collection Due Process or Equivalent Hearing, which provides further clarification regarding this appeal.
Your client must request a CDP hearing within the timeframe outlined on the lien or levy notice. If your client misses the deadline to request a CDP hearing, your client may request an equivalent hearing within one year plus five days of the lien filing.
Use Form 12153 to:
Request a Collection Due Process or equivalent hearing if your client receives any of the following notices:
Attachment to Form 12153
Attach to Form 12153, Request for Collection Due Process or Equivalent Hearing, when you need additional space to explain why your client disagrees with an IRS collection action and how your client proposes to resolve the issue.
Appeal the Denial of Relief From a Federal Tax Lien
Request a Collection Appeal Program (CAP) hearing when the IRS denies your client’s request for lien relief. Request a CAP hearing in any of the following situations:
The IRS filed a Notice of Federal Tax Lien against your client more than one year plus five days ago
Assemble the appeal denial of lien relief package as follows:
“Collection Appeal Request Cover Letter”
Collection Appeal Request Cover Letter
Help resolve your client’s lien issue.
Use the “Lien Relief Qualification Worksheet” to determine what type of lien relief to request for your client, based on your client’s goals and his or her specific situation.
Use the “Client IRS Account Research Phone Interview” to structure a phone conversation between you and the IRS to research your client's IRS account.
Use the “Client Information Request” to obtain the client information and supporting documentation you need to request lien relief for your client.
Client IRS Account Research Phone Interview
Structure a phone conversation between you and the IRS to research your client's IRS account.
This research interview helps you obtain:
Tax years and balances on which a federal tax lien has been filed
The amount assessed for each year with an unpaid balance due
The total balance due for each tax year with an unpaid balance due
The total pay-off amount required for your client to become compliant with the IRS
The collection statute expiration date
Account transcripts for each tax year with a balance due
If your client is able to pay his or her entire liability, determine the pay-off balance as of the date the IRS should receive the payment.
You will need a valid Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization, to obtain client IRS account information over the phone.
You may make other requests or inquiries during your phone call, such as inquiring about other compliance issues your client is having.
Client Information Request - Liens
Obtain the client information and supporting documentation you need to request lien relief for your client.
Customize this form to request the specific information you need from your client.
Lien Relief Qualification Worksheet
Determine which lien relief option is most appropriate for your client, based on your client’s goals and specific circumstances.
Determine your client’s goal and/or status requiring lien relief.
Review the list of specific conditions necessitating lien relief and check the one(s) that apply to your client. At least one of the conditions in the lien relief column you have chosen must apply for your client to be eligible for that type of lien relief.