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When you are delinquent on your federal taxes, the IRS has the power to place a lien on your property. There are several different ways a taxpayer in Washington DC could resolve their IRS lien. They could have their lien withdrawn, meaning it essentially never existed. They could have it released, which means it is no longer enforceable even if it is still present in the local courthouse. A lien can also be discharged or subordinated. To learn which option you need to pursue, talk to a lien resolution attorney.
When the IRS withdraws a lien, it would be as if the Notice of Federal Tax Lien was never filed – thus if someone were to search, they would not find it. Release liens are “satisfied,” meaning they were fully paid or the IRS can no longer enforce that lien; but the record of the released lien is still available through the local county courthouse where it was filed.
A lien discharge would remove the tax lien from a specific property. For most people, that property would be their largest asset, which is typically their home. For more information, a person can see Publication 783 (Application for Discharge of Tax Lien).
When the IRS files a tax lien, it acts as a security interest so that if the taxpayer were to come into some money, that money would have to go to the IRS. That is based upon the priority of the security interest among other interests that may be filed against that taxpayer in the order they were filed. The IRS lien would be discharged when the property sold is worth less than the IRS is bound to.
The IRS does not care about where someone lives or how much their home is worth – they just want to get paid. If a specific property is worthless, the IRS has procedures to remove the lien from that specific piece of property. In some cases, the home is financially underwater, and the DC taxpayer just wants to sell the property so they do not have to keep paying a mortgage for a property that is not going to create equity. The IRS wants to encourage this behavior because it makes it more likely they would get repaid.
When the IRS subordinates a lien, it is not removed, but allows other creditors to move ahead in priority. Thus, it is easier for the taxpayer to get a loan or mortgage, which will ultimately help them repay the IRS debt. For more information, a person can see Publication 784 (Certificate of Subordination of Federal Tax Lien).
The IRS would subordinate a tax lien when there is equity in the home that the taxpayer wants to use to pay their debt but the lien is preventing them from pulling that equity. Subordination is a limited situation which allows that taxpayer to pull out the equity from their home to pay the IRS.
A taxpayer can file Form 12277 (Application for Withdrawal of Filed Form 688(Y), Notice of Federal Tax Lien) in several different situations. The first is if the taxpayer were to fully pay the tax debt or if is no longer enforceable after a 10-year statute of limitations, as well as the taxpayer is in current compliance on filing and paying taxes for the last three years. Alternatively, the IRS could withdraw a lien if the taxpayer enters into a direct debit installment agreement with under $25,000 due. It must be fully paid to the IRS by the earlier of 60 months or by the collection statute expiration date. Then, after three consecutive payments on that installment agreement, the lien would be withdrawn. However, one of the prerequisites is that the taxpayer cannot have had a prior installment agreement default.
“Resolving” a tax lien can mean multiple things. A tax lawyer from Pontius Tax Law can provide value to your case by explaining which outcome will work best for you. Fill out a contact form to set up a consult and learn the various ways to resolve an IRS lien in Washington DC.
Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC, Rockville, MD, Bethesda, MD, Vienna, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.
Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.
