If an IRS tax lien is hurting your credit, or stopping you from purchasing a house or car, the IRS offers a path to freedom.
The IRS will withdraw the lien from public record in the following circumstances:
1. The amount you owe is under $25,000. But this is flexible – see #2, below.
2. Don’t despair if you owe over $25,000 – the IRS calculates the $25,000 threshold not on your current balance, but what you originally owed when your tax return was filed. Because of interest and penalty accruals since the filing of the return, the amount you owe could be more than what you owed when the return was filed. In some cases, it can be twice as much (yes, interest and penalties double what is owed every five years).
But the IRS bases the qualifications for lien withdrawal on what you owed then, not what you owe now. (In IRS technical terms, this is called the SUMRY balance.) The $25,000 is what was originally assessed when your return was filed. It does not include accruals since then. This eases qualifications for the lien withdrawal.
3. You are financially able to enter into an installment agreement with the IRS to repay what you owe within 60 months or within the remaining time the IRS has to collect, whichever comes first.
4. Your installment agreement payments are made by automatic debit out of your bank account. This is called a Direct Debit Installment Agreement.
5. No financial disclosures should be required of you for lien withdrawal with a Direct Debit Installment Agreement – meaning you should not have to tell the IRS where you work, bank or what property you own for the lien to be withdrawn.
6. After you have made three payments in a Direct Debit Installment Agreement, you can request that the IRS withdraw the Federal tax lien that they filed against you.
If necessary, lump sum payments can be made to reduce the original balance owed to under $25,000 to qualify for lien withdrawal. Also, if you are already in an installment agreement, you can convert it to a Direct Debit to qualify for lien withdrawal.
Installment agreements can get tax liens withdrawn, improve your credit score and help you purchase a house or car. It is just a matter of knowing where to turn and how to negotiate the withdrawal with the IRS.