Posted On August 08, 2017

A brief look at tax liens, and getting the IRS to release them, P.2

Last time, we began looking at the topic of releasing tax liens. As we noted, the best way to address the issue is to simply pay the debt, though taxpayers shouldn’t resign themselves to a debt with which they disagree. If the debt is properly calculated, paying it off will result in the full release of the tax lien in fairly short order.

In some circumstances, there are other ways to address tax liens aside from paying off the debt, which isn’t always possible. One possible option is to pursue a discharge of property, which removes the tax lien from specific property. To qualify for discharge, certain conditions must be met.

One possible basis for discharging a tax lien from property is when the taxpayer’s property subject to the tax lien is worth at least twice the amount of the underlying federal tax liability plus any other encumbrances that existed before the IRS filed the lien. Property exceeding that value may be discharged from the tax lien since the property subject to the tax lien is able to satisfy the underlying tax liability.

Another possible basis for discharge is when the tax liability is partially satisfied by the sale of property for an amount equal to or greater than the underlying tax liability. The taxpayer would still have an outstanding tax debt after sale of the property, but discharge of the lien could be issued.

A taxpayer may qualify for discharge of a tax lien when the IRS’ interest in the property has no value, which happens when the debts that take precedence over the tax debt are greater than the fair market or sale value of the property.

The IRS may also allow discharge under an agreement allowing the taxpayer to sell property to satisfy some of the tax liability. The IRS may allow discharge in certain other circumstances as well, but a taxpayer has to have a legally acceptable basis for requesting discharge. That’s where the advice and advocacy of an experienced attorney come in handy.

In our next post, we’ll look at another avenue of relief from a federal tax lien: subordination.