Choosing the Correct IRS Lien Remedy
If the IRS has placed a federal tax lien against your personal assets, you do not have to allow the lien to prevent you from making financial decisions. Taxpayers often ask how to remove a tax lien or how long does a tax lien last. The answer is the IRS will remove a lien from your record in one of three ways. The options are a lien release, lien withdrawal, and lien discharge. Each option has a different process so removing a lien is not a one size fits all process.
Why is a Notice of Federal Tax Lien Filed?
The IRS will file a Notice of Federal Tax Lien after income, payroll, or excise taxes were not paid and the IRS has given the appropriate amount of time to get the delinquency resolved. The Notice of Federal Tax Lien is filed and attached to the taxpayer’s assets. Starting in 2018, credit reporting agencies stopped including federal tax liens on credit reports, but this does not mean a federal tax lien no longer factors in obtaining credit or gaining employment.
Need Help Clearing an IRS Tax Lien?
If an IRS Notice of Federal Tax Lien is encumbering your property, credit, or business financing, an administrative withdrawal under Form 12277 or Form 14135 lien discharge are two options available to taxpayers. Have your IRS transcripts, statutory deadlines, and withdrawal/discharge eligibility reviewed directly by an independent CPA.
How is the Federal Tax Lien Released?
Once the taxes attached to the lien are paid, the IRS will file a lien release in the same jurisdiction where the federal tax lien was originally recorded. The lien release acknowledges the lien has been paid off. The caveat is even though the taxes are no longer owed, commercial credit agencies and background check agencies still report the lien and the release in their reports to clients. For example, a business wants to establish a credit line with a vendor and has paid off the tax lien. The business will still have to explain the lien history before credit can be approved. Another scenario is an employer performing a background check on an applicant for a financially sensitive position. Even though the lien release has been filed, the background check agencies still report the original lien.
Does a Tax Lien Withdrawal Remove the Lien?
The internal revenue code allows taxpayers to be able to wipe a federal tax lien from their records completely as if it was never filed. The request is submitted on IRS Form 12277. The qualifications include a lien was filed prematurely or incorrectly, the taxpayer is under an installment agreement that did not call for a tax lien, the taxpayer has established at least a 60 month direct debit installment agreement for a lien under $25,000 or less, withdrawal would allow the taxpayer to collect funds to pay off the lien, or the lien has been released for longer than three years and the taxpayer has been in compliance for the past three years. If a tax lien is withdrawn under the vendor credit and employment scenarios mentioned previously, the background screening agency will report as if a lien was never filed.
Why Isn’t a Tax Lien Withdrawal Used When Trying to Sell Property?
Another option for a lien removal is a lien discharge. The request is submitted by completing IRS Form 14135. This option is appropriate for sale of property that is being held up because of the lien. The difference between a lien withdrawal and lien discharge are the actions the IRS takes to remove the lien. After Form 14135 is approved, the IRS will issue a conditional commitment to discharge the lien and allow the property to close. If the closing does not pay the lien in full, the lien will remain active and is then attached to either other property or the property owner. The qualifications for the lien discharge include the value of the taxpayer’s remaining assets are twice the amount of the lien (the IRS is sure it can collect the lien from the remaining assets), the proceeds from the sale cover the lien, and the property being sold has no value.
Lien Release, Withdrawal, and Discharge Summary
- Lien Release – the federal tax lien is paid off and the IRS files a lien release. The lien and the release still show in credit reporting agency reports.
- Lien Withdrawal – the IRS will remove the tax lien from the taxpayer’s record as if the lien was never filed. The lien and release will not show in credit reporting agency reports. For more information on lien withdrawals, check out my lien withdrawal Form 12277 overview and Form 12277 step by step guide.
- Lien Discharge – the IRS will conditionally remove the tax lien from a property for it to sell. Check out my lien discharge Form 14135 overview.
Get the Right Legal Document to Clean Your Record
Navigating the difference between an IRS release, discharge, and withdrawal requires precise planning to protect your assets and credit worthiness. Don’t leave your financial footprint to chance. Andris Financial Services is a CPA firm authorized to assist any taxpayer dealing with an IRS lien. Contact me today to find the right path forward!
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IRS Lien vs Withdrawal vs Discharge FAQ
What is the difference between an IRS tax lien release and a lien withdrawal?
An IRS tax lien release (Form 668(Z)) occurs after your tax debt is satisfied or legally expired and confirms you no longer owe the balance. The original Notice of Federal Tax Lien remains visible in public county deed records as a past filing. An IRS lien withdrawal (Form 10916(c)) formally rescinds the public recording treating the lien as if it was never filed.
Once I pay my IRS tax balance, does the federal tax lien go away automatically?
No. The underlying debt is resolved, but the public filing does not disappear on its own. By law, the IRS must issue a Certificate of Release of Federal Tax Lien within 30 days of receiving full payment or approving an acceptable bond. The IRS sends this release to the county clerk to mark the debt satisfied, but the historical record of the lien filing remains in county deed books unless you formally apply for a lien withdrawal via IRS Form 12277.
Does the IRS notify you when a tax lien is released or removed?
Yes. When a lien is paid off, the IRS mails a copy of Form 668(Z) (Certificate of Release of Federal Tax Lien) directly to your address of record, while also filing a copy with the local recording office. If you subsequently apply for and receive an approved lien withdrawal, the IRS issues Form 10916(c) (Withdrawal of Filed Notice of Federal Tax Lien) to you and the county clerk.
What does it mean when an IRS notice says a tax lien has been released?
A tax lien release means the IRS has extinguished its legal claim against your current and future assets because the underlying liability was fully paid, an offer in compromise was completed, or the collection statute expired. While it stops collection action and frees your assets from the government claim, it serves as a receipt rather than an expungement of the public filing.
Why is an IRS lien withdrawal preferred for credit repair and financing over a standard lien release?
A tax lien release confirms your tax debt is satisfied, but leaves the original public notice recorded in county land records, where manual underwriters, title companies, and background check services can still see the past delinquency. An IRS lien withdrawal (Form 10916(c)) formally rescinds the public recording, legally treating the lien as if it was never filed. This removes the cloud on your public record and allows lenders to proceed without penalizing you for an old filing.
If the IRS placed a lien on my house or property, how do I get it removed after paying it off?
Once paid, the IRS files a Certificate of Release with the county recording office where your property is located, updating the title to show the debt is satisfied. To completely clear your public deed history for future sales, refinancing, or credit checks, you can submit IRS Form 12277 to request a full withdrawal. Under IRS policy, if the lien has been released and you maintain clean tax compliance for the prior three years, the IRS can formally withdraw the public filing.
Does receiving a Form 1099-C eliminate an IRS federal tax lien?
No. Form 1099-C reports canceled debt from commercial lenders (such as credit cards or private mortgages) for income tax purposes and has no legal authority over federal taxes. The IRS only releases or withdraws an internal tax lien through official certificates specifically Form 668(Z) for a release or Form 10916(c) for a withdrawal after the tax debt is paid, settled, expired, or administratively rescinded.