Fresh Start Initiative: Federal Tax Lien Relief

The Internal Revenue Service implemented new policies to help financially struggling taxpayers avoid the effects of a federal tax lien.

The Internal Revenue Service may file a federal tax lien if a tax deficiency exceeds $10,000 and a taxpayer is unresponsive. If a taxpayer has less than $50,000 in tax debt and wants to ensure that the government will not file a federal tax lien, the taxpayer may request a streamlined direct debit installment agreement. The streamlined direct debit installment agreement is based on the taxpayer’s ability to pay off his/her debt within 72 months. Therefore, the Internal Revenue Service has a formula, which takes into account the size of the taxpayer’s debt (along with accruing interest and penalties) and ultimately calculates a sufficient monthly payment plan over 72 months.

If a tax lien has been filed and the taxpayer owes $25,000 or less, the taxpayer can request the lien to be removed if the taxpayer enrolls in a direct debit installment agreement with the Internal Revenue Service. The taxpayer must make three direct debit payments on the plan before he/she may request for lien removal. The direct debit payment plan takes roughly two to three months to be established. Therefore, it may take roughly 6 months from the date the taxpayer requests the plan to request that the lien be removed. In order to request withdrawal of the lien, the taxpayer will have to complete Form 12277.

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