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What a Federal Tax Lien Is and Why It Matters

An IRS tax lien is the government’s legal claim against all your current and future property when you owe back taxes. The IRS files a Notice of Federal Tax Lien (NFTL) in public records to alert lenders and other creditors. While the major credit bureaus stopped including tax liens on consumer credit reports, lenders and title companies still check public records. A lien can block home sales, refinances, and SBA or business loans, and it can complicate job or contractor screenings.

Release vs. Withdrawal vs. Subordination: Know the Difference

Lien release means the lien is extinguished. The IRS issues a Certificate of Release when the tax is fully paid, the 10‑year collection statute expires, or a bond is accepted that guarantees payment. Once released, the IRS files the release in the same recording office, and the encumbrance ends.

Lien withdrawal removes the NFTL from public records as if it was never filed. You request this with Form 12277 in specific cases, including when you enter a qualifying Direct Debit Installment Agreement. You may still owe, but the public notice disappears.

Subordination or discharge helps transactions before payoff. Subordination (Form 14134) lets a new lender move ahead of the IRS. Discharge (Form 14135) removes the lien from a specific property so a sale can close; the lien stays attached to you and other assets.

Who Qualifies for a Federal Tax Lien Release?

Paid in full. You qualify for a release once the IRS receives full payment of tax, penalties, and interest. That includes funds from a closing, refinance, or installment payoff.

Bond accepted. The IRS can release a lien if it accepts a bond equal to the liability, conditioned on payment. This is less common but useful in time‑sensitive deals.

Statute expired. The IRS generally has 10 years from assessment to collect. Once that time period ends, the IRS can no longer enforce the debt and must remove the lien.

Compromise or bankruptcy. After your Offer in Compromise is paid and accepted—or after a bankruptcy discharges eligible taxes—the IRS processes the release for those periods.

Note: If the NFTL was filed in error or not in accordance with procedures, you usually pursue a lien withdrawal, not a release.

How to Get Your Lien Released (Step‑by‑Step)

• Confirm your balances and lien filings. Pull an IRS account transcript, get copies of filed NFTLs, and verify assessment dates to estimate the statute expiration.

• Get compliant. File any missing returns and stay current on withholding or estimated taxes. The IRS will not process many lien actions if you’re not in compliance.

• Choose your path to payoff. Options include lump‑sum payment, sale or refinance with escrowed payoff, or an approved Offer in Compromise.

• Coordinate the payoff and documentation. Use certified funds at closing when possible and request a Certificate of Release be mailed to both you and the recording office.

• Track the 30‑day clock. The IRS must issue the release within 30 days after satisfaction or expiration. If it’s delayed, contact the IRS Centralized Lien Unit.

• Clean up public records. After the IRS files the release, ask the recorder to index it, and keep a copy for lenders and background checks.

Can You Remove the Public Lien Notice While You Still Owe?

Yes—through a lien withdrawal. Under IRS Fresh Start guidelines, you can request withdrawal with Form 12277 if your total balance is $25,000 or less when you apply, you enter a Direct Debit Installment Agreement, you make at least three consecutive payments, and you stay in full compliance. The IRS may also approve withdrawal if it will facilitate collection (for example, refinancing at a lower rate that speeds payoff) or if the NFTL was filed prematurely.

Example: You owe $32,000. You pay $7,500 to reduce the balance to $24,500, set up a Direct Debit plan, make three on‑time payments, and file Form 12277. If approved, the NFTL is withdrawn even though you’re still paying.

Selling or Refinancing with a Lien on Record

You don’t have to wait for a full release to move forward. If you’re selling a home, request a discharge of that property from the lien with Form 14135. The title company provides a settlement statement showing the IRS will be paid from proceeds. For a refinance that lowers your rate and helps you pay faster, ask for subordination with Form 14134 so the new lender’s deed of trust moves ahead of the IRS. These actions are common and, when documented well, are often approved.

How Long Does a Federal Tax Lien Release Take?

After you satisfy the liability or it expires, the IRS typically mails the release within 30 days. At closings, field offices can sometimes issue expedited releases the same or next business day with proof of certified payoff. County recording and indexing can add a week or two. For withdrawals and subordinations, plan on 30–45 days in routine cases, longer if documents are incomplete.

Common Mistakes That Slow Down Lien Relief

• Ignoring missing returns or current‑year compliance.

• Waiting to request withdrawal after setting up a Direct Debit plan.

• Forgetting to pay down to $25,000 to qualify for Fresh Start withdrawal.

• Sending payoff without clear payment application or case contact.

• Not coordinating with the title company on discharge or subordination forms.

• Assuming public records will update on their own—keep copies of releases and withdrawals for lenders.

When to Get Professional Help

If you have multiple tax years, a business payroll lien, or a pending sale or refinance, experienced representation can save time and stress. A qualified team coordinates with the IRS Centralized Lien Unit, prepares forms (12277, 14134, 14135), verifies statute dates, and works with escrow and county recorders so your transaction closes on time. The right plan—payoff, withdrawal, discharge, or subordination—depends on your goals and the numbers. A short call with a tax professional can clarify your fastest path to clear title.