An Internal Revenue Service (IRS) tax lien can be released when the full amount owed to the government has been paid or if the IRS accepts a bond that guarantees payment of the debt. A request to release a property lien can also be granted if 10 years have passed since it was filed and the government did not renew it. Provisions in U.S. tax law also permit the release of an IRS tax lien if the taxpayer was in bankruptcy at the time it was filed, the government failed to meet a filing deadline, or when the IRS errs in placing a lien on property.
An IRS tax lien generally remains on property until it is paid in full, along with any penalties and interest that accrue, unless one of the special circumstances exist. In those cases, a letter can be sent to the IRS loan processing unit in the state where the lien was filed requesting a certificate of release of federal tax lien. If an officially recorded copy is needed, the taxpayer needs to contact the recording office in the state where he or she lives.
By law, the IRS must release an IRS tax lien 30 days after the debt is paid. If the lien remains on property, a letter can be sent to the IRS technical services group manager. The document should include proof that the taxpayer satisfied his or her tax liability, which can include a receipt from the IRS, canceled check, or other proof of payment. IRS employees will research the issue and release the lien if the government determines it has been paid. The law gives a citizen the right to sue the government, but not IRS employees, if it purposely does not release a tax lien within prescribed time limits.
An IRS tax lien can be placed on homes, vehicles, and other assets 10 days after a taxpayer receives notice that he or she owes unpaid federal or state income tax. The taxpayer may appeal the decision if he or she believes the IRS is wrong or did not meet deadlines to collect unpaid taxes. Sometimes, the lien will be withdrawn if the taxpayer sets up a payment plan that benefits the government and the taxpayer, or if the IRS determines the debt will be paid faster if the lien is removed.
An appeal officer decides if the IRS tax lien should remain or be discharged. If the taxpayer still disputes the findings, he or she can ask for a court hearing to argue the case. The hearing is generally held within 30 days.
When an IRS tax lien is filed, it becomes a public document available to creditors and the general public. The lien might also apply to any property the taxpayer subsequently buys. While the IRS tax lien is in effect, the taxpayer might be unable to obtain a loan or credit card, and his or her credit rating may be affected.