Few things feel more discouraging than seeing the words “Notice of Federal Tax Lien” attached to your name. Even though tax liens no longer appear on major credit bureau reports, they can still affect your financial life — from mortgage approvals to small business loans.
The good news: it’s easier than ever to remove or withdraw a federal tax lien once you’ve taken the right steps.
📘 Official Resource: Understanding a Federal Tax Lien — IRS
What a Federal Tax Lien Really Means?
A federal tax lien is a public legal claim against all your property — real, personal, and financial — when you owe taxes and don’t pay after receiving a notice and demand. It doesn’t seize your assets, but it secures the government’s interest until the debt is paid or otherwise resolved. If you ignore it, the IRS files a Notice of Federal Tax Lien (NFTL) in your local courthouse or state registry, alerting creditors that the IRS has first rights to your property.
📘 Reference: Notice of Federal Tax Lien
Do Tax Liens Still Affect My Credit?
Yes — even though the three major credit bureaus (Equifax, Experian, and TransUnion) stopped reporting tax liens in 2018, they remain public records.
That means:
- Mortgage lenders still check county records.
- Title companies flag liens during real estate transactions.
- Employers and business partners may see lien filings during background or financial checks.
📘 IRS Explanation: Federal Tax Lien and Your Property
Ways to Remove a Federal Tax Lien
The IRS offers multiple paths to remove or neutralize the lien — depending on your payment status and eligibility.
1️⃣ Full Payment and Automatic Lien Release
When you pay your tax debt in full, the IRS automatically releases the lien within 30 days. You’ll receive a Certificate of Release of Federal Tax Lien showing the debt is satisfied. You can file this certificate with your county recorder’s office to update the public record.
📘 Resource: IRS Certificate of Release of Federal Tax Lien
💡 Tip: Once released, send copies to credit bureaus, lenders, and any institution that previously saw the lien to ensure your records are updated.
2️⃣ Lien Withdrawal
You can request a lien withdrawal if you:
- Owe $25,000 or less,
- Enter a Direct Debit Installment Agreement, and
- Make three consecutive on-time payments.
Once approved, the IRS will file a withdrawal, effectively erasing the lien from public record as though it was never filed.
💡 Important: Withdrawal is different from release. Release means the debt is satisfied; withdrawal removes the lien’s public record entirely.
📘 Form: Form 12277 — Application for Withdrawal of Filed Notice of Federal Tax Lien
3️⃣ Offer in Compromise (OIC) Settlement
If you settle your debt for less than the full amount through an Offer in Compromise, the IRS will release the lien once payment terms are complete. This can be a strong option if you can prove financial hardship or inability to pay in full.
📘 Program Overview: Offer in Compromise — IRS
4️⃣ Discharge of Property
If you need to sell or refinance property, you can apply for a Certificate of Discharge to remove the lien from that specific asset — allowing the sale to proceed while preserving the IRS’s interest in the remaining debt.
📘 Reference: IRS Publication 783 — Instructions on Discharge of Property From Federal Tax Lien
5️⃣ Lien Subordination
Subordination doesn’t remove the lien, but it allows another creditor (like a mortgage lender) to move ahead of the IRS in priority — often enabling refinancing that helps you pay your taxes.
📘 Reference: IRS Publication 784 — How to Request Subordination of a Federal Tax Lien
IRS Lien Actions — Release vs Withdrawal vs Discharge vs Subordination
| IRS Action | What It Does | When You Qualify | Effect on Public Record / Credit | IRS Form / Publication | Best For |
|---|---|---|---|---|---|
| Lien Release | Officially removes the lien after you’ve paid your tax debt in full or the collection period expires. | • Tax fully paid OR 10-year Collection Statute expired. • IRS issues Certificate of Release automatically within 30 days. | Public lien record remains but shows “Released.” Improves future creditworthiness. | IRS Lien Release Info | Taxpayers who have paid in full or whose lien has self-released. |
| Lien Withdrawal | Erases the lien’s public record as if it were never filed. | • Debt ≤ $25,000. • Enrolled in Direct Debit Installment Agreement. • 3 on-time payments made. • Or lien was filed in error. | Removes lien from county/public record; restores full credit visibility. | Form 12277 – Application for Withdrawal | Taxpayers who are paying under Fresh Start or need the lien erased from public record. |
| Discharge of Property | Removes the lien from a specific asset(e.g., to sell/refinance) while keeping it on other property. | • You sell/refinance property and pay IRS its share OR show no equity remains. • IRS approves via property-specific review. | Lien remains on other assets; discharged property becomes free to transfer. | Publication 783 – Instructions on Discharge | Taxpayers who need to sell or refinance a property under lien. |
| Subordination | Lets another creditor (like a mortgage lender) take priority over the IRS lien. | • You’re refinancing or borrowing to pay taxes. • IRS determines subordination increases likelihood of repayment. | Lien stays but lender’s interest moves ahead in priority; helps secure financing. | Publication 784 – Subordination of Federal Tax Lien | Taxpayers needing loan approval or refinance while lien remains. |
How a Tax Lien Affects Mortgages and Property Sales?
A tax lien doesn’t automatically block real estate transactions, but it does complicate them.
Before selling or refinancing, you’ll need to:
- Pay the lien balance at closing, or
- Request a discharge or subordination so the deal can proceed.
Your closing attorney or tax professional can coordinate directly with the IRS.
How a Tax Attorney Can Help?
A tax attorney can:
- Determine whether you qualify for lien withdrawal
- File Form 12277 and monitor the IRS’s processing timeline
- Negotiate lien subordination or discharge for property sales
- Correct public records and communicate with lenders
- Prevent future liens through payment and compliance strategies
Representation ensures the IRS adheres to your legal rights under the Taxpayer Bill of Rights.
📘 Reference: Taxpayer Bill of Rights
Need help with a similar issue? Contact our firm today for a consultation.
A federal tax lien doesn’t have to define your financial future. With the right strategy — whether paying in full, entering a payment plan, or requesting withdrawal — you can remove the lien, restore your creditworthiness, and protect your property.
If you’ve received a Notice of Federal Tax Lien or want help filing for withdrawal, contact Pelham PLLC. Our tax attorneys specialize in lien release, withdrawal, and negotiation with the IRS to help you move forward confidently.
📘 Official Resource: Understanding a Federal Tax Lien — IRS
FAQs
What’s the difference between lien release and withdrawal?
- Release: Occurs when you pay in full — lien satisfied.
- Withdrawal: Removes lien from public record.
How do I qualify for Fresh Start lien withdrawal?
Owe $25,000 or less, be in a Direct Debit Installment Agreement, and have made three on-time payments.
How long does a federal tax lien stay on record?
Typically 10 years, but it can self-release when the collection statute expires.
Should I hire a tax attorney to remove a lien?
Yes — professionals ensure your Form 12277 is complete, monitor processing, and resolve any title or credit issues quickly.
