TAMARA: Hi. I’m Tamara. Welcome to our program about withdrawing a Notice of Federal Tax Lien. With me is Christine, an IRS collection analyst with responsibilities for the lien program. Christine, thanks for joining us today.
CHRISTINE: It’s great to be here.
TAMARA: We have a lot of useful information for you today. Here’s what you can expect. By the end of this program, you will learn what a Federal Tax Lien is, understand the impact of the lien, find out when the IRS files a Lien Notice, learn how you can get a notice withdrawn, receive step-by-step instructions on filling out the IRS application for Lien Notice withdrawal, hear real-world situations where this withdrawal may be requested, and discover other resources for help with your tax lien. Let’s start with the basics. Christine, can you explain what a Federal Tax Lien is?
CHRISTINE: Sure. Let’s say you have some unpaid taxes either through owing money when you filed your return or as the result of an audit. So, the IRS sends you a bill, and if you don’t pay it, we automatically have a lien. The lien is a claim against all of your property, whether it is personally owned, like a home, or a business property, like accounts receivable.
TAMARA: So, the subject of this video is how to request a withdrawal of Lien Notice. So, is there a difference between the lien and the Lien Notice?
CHRISTINE: Yes, there is. The lien is the actual claim against your property. The Lien Notice is the notification for your creditors of the lien’s existence. Unless the IRS files a Lien Notice, no one knows about the lien except you and the IRS. Because the public notice is really a notice to your creditors, it may influence whether a lender will loan you money, and it could impact your credit rating. The public-notice filing also protects the IRS if you file bankruptcy or if there’s litigation involving your property.
TAMARA: Okay, let’s assume the IRS has publicly filed a notice of the lien. What would it mean to a taxpayer to have the Lien Notice withdrawn?
CHRISTINE: Well, if the IRS withdraws the notice, it means that we abandoned our secured-creditor standing and will not be competing with other creditors. The withdrawal of the notice is not saying that your lien is released or that your tax debt has been resolved. The lien itself is only released if the tax debt has been satisfied or our time to collect your liability has expired. However, a taxpayer may find withdrawal of the notice helpful in improving their financial situation and ability to pay their tax debt.
TAMARA: Oh, I understand, but under what circumstances can the IRS withdraw the lien’s public notice?
CHRISTINE: There are four ways allowed by law. First, the IRS can withdraw the notice if our paperwork wasn’t in order before we filed the notice. Second, sometimes when you’re paying off your lien in installments, we might be able to withdraw the Lien Notice depending on the type of repayment plan you have. Third, we may be able to withdraw the notice in cases where withdrawing the notice will either make it easier for you to pay your tax debt or for us to collect it. And fourth, if it is in the best interests of both the government and you or the taxpayer advocate acting for you. This type of withdrawal could include a situation where the lien and Lien Notice have already been released.
TAMARA: Okay, so, we’ve talked for a while about when the IRS can withdraw a lien’s public notice. Now let’s talk about how to make it happen. What form needs to be filled out by the taxpayer to request a Lien Notice withdrawal?
CHRISTINE: You will need Form 12277 called Application for Withdrawal of Filed Notice of Federal Tax Lien. The form is two pages long. Page one you fill out and send to us. Page two has the instructions for the form.
TAMARA: And so, where can taxpayers find this form, Christine?
CHRISTINE: Go to IRS.gov and enter “Form 12277” in the search box. You can also get the form by mail by calling 1-800-TAX-FORM.
TAMARA: Okay, so, let’s take this time to go over the form together. I see parts 1 through 8 are just basic identification questions that are pretty self-explanatory, but what about part 9?
CHRISTINE: Part 9 asks you to provide a copy of the filed notice you’re asking to be withdrawn or information from the notice. Providing this information will move your application along faster, especially if there’s more than one notice filed. If you have kept a copy of the Lien Notice we have sent you when we filed the notice, you could use that to attach with your Form 12277.
TAMARA: So, what are we looking for in part 10?
CHRISTINE: Part 10 is asking if your tax debt still exists and whether a notice of the lien’s existence has or has not been released. So, the choice is Open, Released, or Unknown. Open means the notice is still on file and taxes are still owed. If the taxes and the lien have been satisfied or the time period we are given to collect the debt has run out, you would check the Released box. If you are not sure what the situation is, check the box for Unknown.
TAMARA: It looks like parts 11 and 12 ask for the reason why the taxpayer is requesting that the notice be withdrawn. Can you go over what each of the choices mean?
CHRISTINE: Sure. If you are requesting withdrawal because the notice was filed too soon, check the first box. An example of this would be if the notice is filed after you have filed bankruptcy. Here’s an important tip. Be sure to include a separate Form 12277 for each request where you feel the notice was premature. The second box in part 11 would be checked if you have an installment agreement but the IRS did not tell you about filing a Notice of Federal Tax Lien. Furthermore, if you are under a Direct Debit Installment Agreement and meet the criteria for a withdrawal of your notice, be sure to check the Direct Debit box. The next box in part 11 is for requesting the IRS withdraw your notice because it will make collection easier. Check the last box you see here if you are requesting we withdraw your notice because it is in yours and the government’s best interests. This is also the box you would check when requesting we withdraw the notice even though the lien and the notice have been released.
TAMARA: Part 12 of Form 12277 asks the taxpayer to explain the basis for the withdrawal request. Any tips on correctly filling this out?
CHRISTINE: Absolutely. Please use as much detail as you need to explain your circumstances fully in part 12. Attach any documents that support your statement and use separate sheets if needed. Also, be sure to include the words “See attached” at the end of section 12 if you are including attachments.
TAMARA: Any last tips on completing the Lien Notice withdrawal request, Christine?
CHRISTINE: Well, don’t forget that you must sign the Form 12277 on the bottom or your representative can sign for you if he or she has a power of attorney on file with the IRS. You’d be surprised how many of these requests we have to send back to get a signature.
TAMARA: Now that you’ve told us how to fill out the form, Christine, can you give us a real-world example where the Lien Notice withdrawal and the form would be used?
CHRISTINE: I’d be glad to. Okay, let’s say you feel withdrawal of the notice will also help you pay off the tax you owe faster. First, you check the box “Withdrawal will facilitate collection of the tax” in part 11 of the Form 12277. For instance, maybe you are being offered a job that involves money management. Your potential new boss says they cannot hire you unless the Lien Notice is withdrawn. You explain that in part 12 and describe how you would then be able to pay the taxes once you got the new position. And don’t forget to attach proof with your request.
TAMARA: So, give us another situation where withdrawing the Lien Notice would help a taxpayer get a job and start to pay down his or her tax debt.
CHRISTINE: Okay. Let’s say you are trying to get a license needed for work such as a realtor’s license. The notice of lien is already released, but it’s still on your credit report, and it’s preventing you from getting the license. You ask us for a withdrawal of the release notice and show us you would be able to get your license if the release notice were withdrawn. We check your account and see that you have filed and paid all your taxes since then. We would be able to consider your request for withdrawal of the notice under the “best interests” category. Here’s an important tip. If you want us to send a copy of your withdrawal to any third parties like credit-reporting agencies, financial institutions, or creditors, you must authorize this in writing and include their names and addresses.
TAMARA: So, you’ve completed Form 12277. Where do you send it, and what happens next?
CHRISTINE: Send your Form 12277 to the IRS office assigned to your case or to the local advisory group manager. You can find the addresses in Publication 4235. We’ve included a hyperlink next to the video you are now watching. After the IRS receives your form, we will contact you. If we agree with your request and withdraw your Lien Notice, we send you a copy of the notice withdrawal and notify the third parties you included with your request.
TAMARA: What happens if the IRS doesn’t agree to withdraw your Lien Notice?
CHRISTINE: If we turn down your withdrawal request, you’ll get a letter telling you IRS has rejected your request, along with Publication 1660, which explains your appeal rights. The first thing to do if you disagree with our decision is to contact the manager who signed the letter.
TAMARA: So, where can taxpayers in similar situations get specific advice about Lien Notice withdrawals?
CHRISTINE: You can speak directly to an IRS expert in lien withdrawals. They’re known as advisors and work out of our collection division. IRS Publication 4235 has all their addresses and local phone numbers. Download the collection advisory group addresses publication at IRS.gov or call 1-800-TAX-FORM to have one mailed to you. And for more general information, you can always visit our website, IRS.gov, and type “lien,” L-I-E-N; in the search box to see everything we’ve talked about today. The search results include a website and a series of videos with this information and instructions from the IRS appeals site on how to appeal a collection decision.
TAMARA: That sounds great. Christine, thanks for all your help. I hope you find this program useful and informative as you work your way through the Federal Tax Lien Notice withdrawal process. Thanks for watching.