A tax lien is a legal document filed by the Internal Revenue Service. Liens are recorded in the county where you own property, and appear on your credit report. The lien alerts creditors to the fact that the property you own is encumbered by tax debt. Unlike other liens, such as a mortgage, which only attaches to your home, a tax lien essentially attaches to all assets you own. These assets may include your home, vehicles and luxury items. If you sell these assets while you have a tax lien, the proceeds from the sale must be paid to the IRS. If a tax lien filed against you is incorrect, you may have options to get the lien released or withdrawn.
Incorrect Lien Balance
An incorrect lien balance may appear for a tax lien when your balance has been adjusted by payments you make toward the debt. When you legitimately owe tax for the period included in the lien, the Internal Revenue Service does not adjust and re-record lien balances to reflect payments made, so it is normal to notice inconsistencies with the amount recorded on your lien and the actual amount of your balance. If you need to know the amount required to pay off your liens, contact the IRS at 800-913-6050.
An erroneous lien may appear when the lien covers a balance for a tax year in which you do not owe or involves a tax year for which the IRS is no longer legally allowed to collect. In the instance of erroneous liens, you automatically qualify for a lien release or withdrawal. Contact the IRS to request a withdrawal based on one of these circumstances. The IRS generally has 10 years from the date a tax balance is accrued to collect. A tax balance accrues on the date you file a return showing a balance due, on the date the IRS prepares a return for you (substitute for return) which shows a balance due, or on the date you accrue a balance through an audit of your return. The most recent date of these occurrences is used to calculate the date that collection activity will expire on the tax period. If the IRS prepares a return for you showing a balance and several years later you file a replacement return for the same tax period which also shows a balance, the IRS will start the collection period over on the date you file your return.
In most cases, the IRS releases liens for periods which have been paid in full automatically within 30 days from the date of payoff. Automatic releases for periods which have been settled through alternate IRS programs also automatically release within this time period after all settlement payments have been paid. If you need the lien released sooner, you can contact the IRS and request an immediate release.
Collection Advisory Group
The IRS Collection Advisory Group is a special unit that handles lien-related inquiries. This unit processes lien release and withdrawal requests, as well as lien-related matters including payoff amounts, subordination requests and discharges. A lien subordination involves asking the IRS to take a step down in priority to allow another lien holder to take a primary position. The IRS may do this when the subordination allows your balance to be paid in full, such as through the refinancing of property attached to the lien. A discharge of the lien involves a request to remove the lien for less than what is owed to allow the property to be sold for less than the lien amount. The IRS may consider this when the value of assets attached to the lien is less than what is owed and therefore less than the IRS could expect to recover through its own sale of the assets. To resolve these issues, contact the IRS Centralized Lien Processing unit at 800-913-6050, or contact the Collection Advisory Group for your area. Collection Advisory Group contact information is available in IRS Publication 4235.
With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.