All about Federal Tax Liens and Getting Them Released

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Yesterday I was contacted by Gerri Detweiler who is associated with credit.com She had some questions about Federal Tax Liens, credit and how to get them released. While I was typing her answer, I thought that my blog visitors might benefit from this information as well.

1. When you pay or settle a tax debt, how long does it take the IRS to release the lien? What is the procedure for doing so?

Answer: The statute says that they have 30 days to release the tax lien. See Internal Revenue Code 6325. That's how it's supposed to work but in reality they often overlook it and it doesn't get done. If this happens then a taxpayer can contact the Lien Desk by phone ( 800) 913-6050 fax (859) 669-3805. If you look at a copy of an actual Form 668(Y)(c) Notice of Federal Tax Lien you will notice a bold black box about half down the page on the left hand side. It says that if the lien is not refiled by the refile date in column (e) then the lien is releaseable on its face. That sounds complicated but what it means is that if another lien wasn't filed before the dates in column (e) then the lien is no longer enforceable. This sometimes complicates matters because the IRS is often reluctant to issue a release for an expired lien.

2. Does the IRS automatically notify the credit agencies that the lien has been released? If not, what do consumers need to do to make sure their credit files are updated?

Answer: When the Certificate of Release gets filed in the courthouse where the lien was originally filed, theoretically the release should get picked up by the credit reporting agencies. A much better practice would be to order three official copies of the release and proactively send them into the three credit bureaus. It could take months or years for them to be automatically picked up by the bureaus.

3. What if you find an tax lien on your credit file and don't recognize it as yours? How do you research it to find out if it is valid?

Answer: This is a much trickier question. What you would need to do is research the public records offices of every county that you have lived in since the issuance of the Federal Tax Lien. The official name for this records office varies by state. In Florida it is called the Official Records of the Clerk of Circuit Court. In California it's called the Office of the Recorder. Some states have most if not all of these records online and some states have none of them online.

4. What if you find an old tax lien on your credit file and aren't sure you have paid it? What is the procedure for investigating it with the IRS?

Answer: You can call the IRS to inquire but this can sometimes exacerbate a problem that has long been dormant. The best way by far to investigate such a situation is to contact a tax professional, well versed in handling tax controversy cases and have them file a Freedom of Information Act request. This is very discreet way to inquire without setting the IRS Collection machine lose on a taxpayer.

5. What if you find an old tax lien on your credit file, believe you paid it but don't have records anymore? What is the procedure for investigating it with the IRS?

Answer: Similar answer to question 4. You will ultimately have to check with the IRS to see if the liability has been paid. It's important to note that there is a 10 year statute of limitations for the collection of the tax. The ten years begins to run from the assessment of the tax and there are many exceptions to this rule and circumstances that can cause the statute time to be extended (sometimes very significantly). This is another situation that is best left to a professional to decipher.

6. How long should you expect the above to take?

Answer: Such an analysis should take 60 -90 days. A lien release subsequent to a request 30-90 days.

7. What can you do to expedite the process if you are in the process of getting a mortgage, for example?

Answer: You could contact the Office of the Taxpayer Advocate for your local area. See the IRS website at www.irs.gov for the phone number for your local area. The Taxpayer Advocate is an independent branch of the IRS whose job it is to fix bureaucratic snarls and delays. There is no charge for their services. Using the Taxpayer Advocate can be very advantageous, especially from the point of view that you get one person to help you instead of speaking to anyone who answers the phone.

8. Are there any tips you would offer for consumers who find tax liens on their credit files?

Answer: Be very cautious about contacting the IRS about tax liens that may pop up. You can wake the sleeping giant and really turn your financial life into a living hell. It's best to get professional help unless you are sure that you have paid off the lien and it's just a matter of getting a release to clear up that issue.

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Comments on All about Federal Tax Liens and Getting Them Released

August 21, 2008

Virginia Boutwell @ 6:25 pm #

2 weeks ago, I found 2 tax liens on my Equifax report. One from the state of MS & the other was a Fed Tax lien. They were date from 1992 (Fed) & 1995 (State). These were state sales taxes ($3136.00) & payroll taxes ($34,598.00) from a business I owned in MS until 1988. I moved in 1989. No knowledge of anything owed. When I checked into them, they were audits from 1988. They have never been entered on my credit reports. Circuit Court in MS said that credit bureaus send their people in to check the records. I said…from 20 yrs. ago ? She had no answer. I have no records to defend this
and am stunned that it would service after 20 years. Any defense against Equifax ? My credit was perfect with scores well above 700. I have disputed this with Equifax & am waiting for a response. However, I don't have much faith in the response of the Circuit Court or State Tax Commission.

October 2, 2008

calle @ 9:46 pm #

So in essence , if I have a certificate of releases form despite it showing up on my credit – this does mean I am free correct? What about in the case of a defunct business where there are no assets?

November 5, 2008

Russell Saurbaugh @ 11:24 am #

On Sept. 12, 2007 a Certificate of Release of Federal Tax Lien was filed in the County Clerks office. The years covered by this release were 1992, 1993, and 1994. All tax liens were Form 1040 tax, income tax. October, 2008, a Revenue Officer showed up at my workplace and informed me that a mistake was made on filing those lien releases and that he was going to "refile" the liens. I received a Notice of Federal Tax Lien about two weeks after the Revenue Officers visit. The "new" Notice of Federal Tax Lien lists 1992, 1993, and 1994. Do I have recourse on this new lien? How can it be that I receive a Lien Release, duly and properly recorded, and then have a Revenue Officer tell me that a mistake was made and that a new lien will be filed for those very same tax years?

January 6, 2009

Chuck in Tampa @ 2:47 am #

If I had a Federal Lien from a tax issue that has since been discharged in a chapter 7 bankruptcy, how do I go about having that Lien removed?

April 6, 2009

Sher @ 3:24 pm #

I found an old tax lien (17 years old) one 2 credit reports but not the other. I believe it was unpaid by my ex husband. How do I get it off the report without the risk of the IRS attempting to collect?

April 10, 2009

Greg in Irving @ 1:00 pm #

The IRS put a Tax lien on my wife's property in Texas for my failure to pay 941 taxes on a business she was not apart of. The assestment is 12/27/1999. I am on a payment plan.
My name is not on the Deed of Trust and financing documents.

She needs to refinance the home inorder to lower the monthly payments. However my lien is on my credit report. I understand I can submitt a Certificate of Subordination of Federal Tax Lien and hope IRS will approve it. Do you have any advice?

April 11, 2009

JacquelineRothfuss @ 9:33 am #

15 years ago I signed a document as a officer of a corporation my boyfriend's son formed. In 2003 he ran into witholding tax payments with the IRS. The IRS filed a tax lien on me even though I had nothing to do with the operation of this corporation and never received any monies from the corporation. I signed the papers only to help hin out because he needed another officer. 13 years after this I received the tax lien. Any refund from from my IRS 1040 return is applied to the lien. What can I do to eliminate the IRS action?