During 2011 the IRS announced new policies and programs to help taxpayers pay back taxes and avoid tax liens.“We are making fundamental changes to our lien system and other collection tools that will help taxpayers and give them a fresh start,” IRS Commissioner Doug Shulman said. “These steps are good for people facing tough times, and they reflect a responsible approach for the tax system.”

The IRS lien filing threshold increased from $5,000 to $10,000, however, liens may still be filed on amounts less than $10,000 when circumstances warrant. The IRS will not retroactively apply the new $10,000 lien filing threshold and automatically withdraw a previously filed lien. A federal tax lien gives the IRS a legal claim to your property for the amount of an unpaid tax debt and informs the public that the government has filed such a claim.

Requesting a lien withdrawal after the lien has been released

The IRS may now issue a withdrawal of a filed Notice of Federal Tax Lien after the lien has been released. If you wish to have the Notice of Federal Tax Lien withdrawn, you must request the withdrawal in writing. Generally, eligibility requirements are:

  • Your tax liability has been satisfied and your lien has been released
  • You are in compliance for the past three years in filing your tax returns
  • You are current on your estimated tax payments and federal tax deposits, as applicable.

Lien withdrawal after entering into a Direct Debit installment agreement

If you are a qualifying taxpayer and meet the eligibility requirements, you may have your lien withdrawn after entering into a Direct Debit installment agreement.  Qualifying taxpayers are:

  • Individuals and
  • Businesses with income tax liability only

Eligibility Requirements are:

  • The current amount you owe must be $25,000 or less
  • If you owe more than $25,000, you may pay down the balance to $25,000 prior to requesting the lien withdrawal to be eligible
  • Your Direct Debit Installment Agreement must full pay the amount you owe within 60 months or before the Collection Statute expires, whichever is earlier
  • You must be in full compliance with other filing and payment requirements
  • You must have made three consecutive direct debit payments  
  • You cannot have previously received a lien withdrawal for the same taxes unless the withdrawal was for improper filing of the lien
  • You cannot have defaulted on your current, or any previous, direct debit installment agreement

If you are currently on a regular installment agreement, you may convert to a Direct Debit Installment Agreement. Once the IRS withdraws a tax lien you can notify the credit reporting agencies and they will remove the lien from your credit report.