Federal tax lien: release, withdrawal, discharge, and subordination.

Section 6323(j)(1) allows a withdrawal on four grounds: the filing was premature or otherwise not in accordance with IRS administrative procedures; the taxpayer entered into an installment agreement to satisfy the liability, unless the agreement provides otherwise; withdrawal will facilitate collection; or, with the consent of the taxpayer or the National Taxpayer Advocate, withdrawal would be in the interests of the taxpayer, as the National Taxpayer Advocate determines, and of the United States. IRM 5.12.9.2 says the IRS may, but is not required to, withdraw when a ground is present, and that withdrawal is mandatory when the notice was filed in violation of the automatic stay in bankruptcy.

IRM 5.12.9.3.2.1 sets out a direct debit route for individuals, business income tax, and businesses that are out of business. A notice generally should be withdrawn when the taxpayer is in a direct debit installment agreement, the unpaid balance of assessments is $25,000 or less at the time of the request, the agreement will pay in full within 60 months or before the collection statute expires, whichever comes first, the request is in writing, the taxpayer is in compliance with other filing and payment requirements, at least three consecutive electronic payments have been processed with no default the taxpayer caused under this or any earlier direct debit agreement, and no earlier withdrawal for the same periods was granted, other than one for an improper filing. The IRS says a taxpayer who owes more may first pay the balance down to $25,000. The IRM says a new notice may be filed after a default.

A withdrawal can also follow a release. IRM 5.12.9.9 says a request under section 6323(j)(1)(D) will generally be granted when it is in writing, the liabilities on the notice were fully satisfied, a certificate of release was issued, and the taxpayer has filed required returns for the prior three years and is current on estimated tax payments and federal tax deposits. A liability that ended only because the collection period expired, or through a bankruptcy discharge, does not count as fully satisfied.

Official source: 26 U.S.C. 6323(j), withdrawal of notice
Official source: IRM 5.12.9, Withdrawal of Notice of Federal Tax Lien
Official source: Form 12277 (Rev. 10-2011)
Official source: Understanding a federal tax lien, withdrawal options

I handle the lien when a sale or refinance of real estate is under contract, when a business needs credit and the lender wants priority over the United States, when a closing date is fixed, when a notice names the wrong person or was filed in error, and when the IRS has denied a withdrawal, discharge, or subordination. In a sale or refinance, the choice of certificate, the valuation, the title report, and the timing bear on whether the certificate is in hand at closing, and Publications 783 and 784 ask for the application at least 45 days before the transaction date.

A taxpayer who has paid in full can handle the release alone: the IRS says it releases the lien within 30 days after payment, and Publication 1450 lists what a written request contains if the lien has not been released by then. A taxpayer in a direct debit installment agreement who meets the conditions above can apply on Form 12277 following its instructions. Publication 783 states that a representative is not needed to request a discharge, and Publication 1660 states that a taxpayer may self-represent in a Collection Appeals Program case.