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The ABCs of tax liens, part 2: How can you get rid of a lien?

In the first part of this post, we discussed several negative effects that can result from a tax lien. These include keeping you from selling or refinancing your house and hurting your credit rating. Because credit checks by prospective employers are increasingly common, a tax lien can even make it more difficult to get a new job.

In this part of the post, let's discuss how you can get rid of a lien on your property.

One way to get a lien released is to pay off your tax debt. Once you pay up, the IRS must release the lien within 30 days.

Of course paying your tax debt is easier said than done. After all, the very reason that you have tax debt in the first place may be that you couldn't come up with the money to pay your taxes.

It may be possible, however, to use an installment agreement (IA) or offer in compromise (OIC) to resolve your tax debt. Once an IA or an OIC is in place, you may be able to get the IRS to withdraw its lien.

There are specific rules on what tax compliance status necessary for withdrawal of a lien. For example, if you are in an installment agreement that doesn't involve direct debit, one of those steps is to convert the agreement to direct debit.

Short of getting the IRS to withdraw a lien, there are also provisions in the Internal Revenue Code to get at least some lien relief in other ways.

One is to remove the lien from specific property, which is called a "discharge". Another is to allow creditors other than the IRS to take priority over the IRS. This is called "subordination."

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