When you owe a tax debt to the federal government, the IRS may place a tax lien on your property to secure payment. A tax lien can complicate your financial situation by affecting your ability to sell property, secure credit, or refinance.
If you’ve partially paid off your tax debt, navigating the process of getting a tax lien withdrawn can feel overwhelming. However, understanding the steps involved can help you move forward.
What is a federal tax lien?
A federal tax lien is a legal claim the IRS places on your property—such as real estate, vehicles, or other assets—when you owe a tax debt and haven’t paid it in full. It gives the government a stake in your property until you satisfy the debt.
Steps to request a tax lien withdrawal
Once you’ve partially paid off your tax debt, you may be able to request a federal tax lien withdrawal. This process officially removes the lien from your records. However, it requires navigating some specific steps with the IRS.
While paying off part of your tax debt is an important step, the lien may not be automatically withdrawn. You’ll need to formally request the lien withdrawal from the IRS. To initiate the withdrawal process, you must submit IRS Form 12277, Application for Withdrawal of Filed Form 668(Y), which is the Notice of Federal Tax Lien.
The IRS will typically consider withdrawing the lien if you’ve entered into a payment plan. They’ll also consider withdrawing if you have paid a significant portion of the debt. You may find success if you can demonstrate that the withdrawal will improve your ability to pay the remaining balance.
What happens after the withdrawal request?
Once you submit your request, the IRS will review it to determine whether you qualify for a lien withdrawal. The IRS will evaluate your request based on factors like your payment history and the remaining balance. They’ll also consider your overall financial situation.
If the IRS approves your request, they will issue a lien withdrawal. They will send the notice to credit bureaus and relevant parties to update your records. If the IRS denies your request, you can take steps to resolve any issues. This typically means paying down more of the debt or negotiating further.
Moving forward with financial confidence
Navigating the complexities of federal tax lien withdrawal after a partial payment requires patience and attention to detail. However, the reward is worth the effort. Successfully removing a lien can help you regain financial freedom. Staying proactive ensures that you can take control of your financial future with confidence.