The IRS issues a Certificate of Release of the Federal Tax Lien if one of the following occurs:  

• Payment for the debt is made in full, including tax, penalties,interest and other fees,
• The statute expires, or
• The IRS accepts a bond guaranteeing the payment of the debt.

The taxpayer also pays all fees charged by the recording office to release the liens. 

In most cases, the IRS doesn’t need to issue a Certificate of Release of the Federal Tax Lien. This is because the document has a built-in method of self-release. If no refiling of the tax lien occurs and the statute expires, the Notice of Federal Tax Lien serves as the release document.  

Taxpayers can find self-releasing language under the name and address on the Notice of Federal Tax Lien. Each tax liability has a separate date for self-release. Most noteworthy, the tax lien will only be released once the entirety of the tax debt is resolved or the statute expires. If a refiling is submitted to the recording office before it expires, the lien will not be released. 

Notices of Federal Tax Lien aren’t limited to one taxpayer. Many notices list more than one name. The IRS explains, “Occasionally, one of the persons shown on the notice of lien resolves all or part of their liability, but the other person(s) shown on the notice of lien still owes the liability.” Certificates of Release of Federal Tax Liens may be issued with an exemption in these cases. They’re identified as “Partial,” which indicates that only the taxpayer who resolved their share of the debt is released. 

The IRS also notes, “Occasionally, some, but not all, of the liabilities shown on the notice of lien are satisfied, but the remainder of the liabilities are still owed. Although the IRS normally waits for all the liabilities on the notice of lien to be satisfied before releasing the lien, there are circumstances where Certificate of Release of Federal Tax Lien annotated “Partial” may be issued only for the liabilities satisfied.” 

Once in a while, the IRS makes a mistake when filing a Certificate of Release of Federal Tax Lien. The IRS offers the following examples: 

• A release is issued in connection with a collateral agreement associated with an offer-in-compromise that has been breached, or 
• A notice of lien isn’t filed in a timely manner,thus allowing it to inadvertently self-release. 

The IRS reverses a release when an error such as these occur. They accomplish this by filing a Revocation of Certificate of Release of Federal Tax Lien with the recording office.

In these cases, the IRS commonly files a new Notice of Federal Tax Lien. The new tax lien becomes effective as of the new filing date, in contrast to the original filing date. This process applies to all liens filed on the taxpayer’s properties across the country. Therefore, taxpayers have challenges when applying for real estate credit.

It’s certainly difficult to secure credit on a property that is encumbered by a tax lien. Financial resources hesitate to extend credit if they’re not guaranteed first priority in the next transaction. That's because their investment is more at risk. Many times, the IRS will agree to subordinate the lien. That means the tax lien will not have priority over a new creditor. As a result, the loan can be executed and the debt  can be resolved.

Consider the example of a taxpayer trying to secure a second mortgage. This taxpayer intends to use cash that results from the second mortgage to resolve his or her debt. The taxpayer should notify the IRS of this intention when requesting a subordination of the tax lien. If the IRS knows the taxpayer is cashing out equity to resolve the tax debt, they’re more likely to agree.

Although the IRS provides instructions for releasing or subordinating a lien, it can be a complex and tedious task. Tax Champions is a full-service tax relief firm with over 35 years of experience. We’ll work with the IRS on your behalf to permanently remove the tax lien. We’ll also negotiate your tax debt and arrange an affordable payment plan. Our goal is to bring your case into compliance with the IRS for your peace of mind. 

Our clients’ satisfaction is important to us. We strive to exceed their expectations, as indicated by our A+ rating at the Better Business Bureau. We have no customer complaints at the Better Business Bureau, Board of Accountancy nor the IRS. Above all, want our clients to feel great about their decision to hire us.

Give us a call today at 800.518.8964 any time during the day and evening, seven days a week. Our knowledgeable and friendly staff is available to take your call 365 days a year. We’re happy to provide a free personal case review to determine the best program to suit your needs. There’s no obligation to hire our firm for this free review. 

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Contact Tax Champions today to gain some clarity on your options. Don't waste another moment. You’ll sleep better tonight knowing your case is in capable hands. We look forward to hearing from you.