Last week’s blog discussed how you could discharge an asset out from under the “blanket” of an IRS tax lien in order to sell a house. You can link to it here.

This week’s blog will go into detail another one of the options available to taxpayers to navigate around an IRS tax lien. This option is known as withdrawal.

My firm, By The Book Taxes, located in Norwalk, CT specializes in income tax preparation for individuals, families and self-employed people. By the Book Taxes also helps clients resolve their tax debts by preparing and filing Installment Payment Agreements, Offers-in-Compromise, Currently Not Collectible and Innocent or Injured Spouse applications.

If you incur a tax debt of $10,000 or more, the IRS will file a “Notice of Federal Tax Lien” or NFTL which notifies all of your other existing and potential creditors that you owe the IRS. This will make you a less credit worthy borrower and could harm your credit score if it is reported to the credit rating agencies.

It is possible to request that the NFTL be withdrawn to improve your credit profile if certain conditions are met. These conditions are:

  • Your balance due must be less than $25,000
  • You must be on a direct (electronic) debit payment plan
  • There must be less than sixty (60) months left on your payment plan
  • You must have already made three (3) consecutive direct debit payments

If you satisfy all these requirements, you may submit IRS Form 12277 to request that the NFTL be withdrawn. This doesn’t remove the lien, just the credit score killing “Notice”.

If you are a taxpayer with an existing payment agreement and can make a payment to get your balance due under $25,000, then this option could work for you.

If you have years of unfiled tax returns or owe the back taxes, please call me. I can help.