If you owe the IRS substantial amounts in back taxes, the agency can make a legal claim to your property to offset your tax debt. This claim is referred to as a tax lien and applies to your property for unpaid taxes.
The good news is the IRS can release a tax lien once you settle your tax debt in full or if the tax lien becomes legally unenforceable due to the statute of limitations.
In this post, we cover the basics of what you need to know for a tax lien release and whether the IRS can refile a lien.
Do IRS Tax Liens Have a Statute of Limitations?
Yes. The IRS has a 10-year limit to collect back taxes from the date they assess your taxes, including if a tax lien is issued. This date is known as your CSED or Collection Statute Expiration Date.
If you have not filed your returns, however, your statute of limitations period will not begin until after you do so. Keep in mind that in some cases the IRS can also extend the statute of limitations.
When Will the IRS Issue a Certificate of Release of Federal Tax Lien?
The IRS typically issues a Certificate of Release of Federal Tax Lien after you have fully settled your tax liability, including any accrued interest plus penalties. As mentioned earlier, once the IRS receives payment in full, it will release a lien within 30 days.
Other situations that can lead to an IRS tax lien release include:
- Your tax debt has been resolved through an installment agreement or Offer in Compromise: Generally, the IRS may consider releasing the lien once you have satisfied specific conditions, including making a specific number of consecutive payments.
- Your CSED has passed: Once the statute of limitations expires, the IRS releases the lien without needing a separate certificate.
What Does a “Partial” Tax Lien Release Mean?
A partial lien release removes a federal tax lien from a specific piece of property. However, the lien remains in effect and may prevent the sale or transfer of other properties that a delinquent taxpayer owns.
You can ask for a partial release of a tax lien when you must transfer property to settle your back taxes. In other words, you can request a partial tax lien release to sell a specific property that will help pay an IRS tax debt.
Is a Tax Lien Release Permanent?
In most cases, a tax lien release is permanent and signifies that you have fulfilled your tax obligations or have successfully resolved outstanding tax debt with the IRS. Your county clerk’s office will note your tax lien release and may keep a record of an IRS lien having been filed for up to 10 years.
Note that tax liens have not appeared on credit reports since April 2018. Prior to that, liens were included on credit reports for 7-10 years.
When Can the IRS Refile a Tax Lien?
Even after a tax lien release, the IRS can refile the lien. Refile notices are special tax liens that extend the life of a federal lien. The general rule is that the IRS can refile a tax lien anytime within ten years from the date they assessed your tax debt.
Here are some of the reasons why the IRS refiles a tax lien:
- New assessment: If the IRS assesses additional taxes after an initial tax lien has been filed, the agency may refile the lien to account for the new tax debt amount.
- Lien release or expiration: In some cases, if a federal tax lien is released or expires and you still owe significant unpaid taxes, the IRS can choose to refile the lien to allow it more time to collect your back taxes.
- Acquisition of new assets: In other scenarios, the IRS may release a tax lien on specific pieces of property while keeping the lien on remaining assets. If you acquire new assets but still owe IRS back taxes, the IRS may refile the lien to cover the newly acquired property.
- Legal actions: If litigation extends beyond the original tax lien, the IRS may refile the lien based on the outcome of a court ruling.
How Long Can the IRS Extend a Tax Lien When It Is Refiled?
The CSED is generally 10 years from the date the tax was assessed. Refiling the NFTL does not extend the CSED or the IRS’s time to collect the debt. Instead, it ensures the IRS maintains its claim priority on the taxpayer’s property in relation to other creditors. If the IRS does not collect the tax within the CSED timeframe, its legal claim to the taxpayer’s property for that specific tax debt generally ends.
Owing the IRS back taxes can be a stressful experience, especially when they issue a tax lien on your property to recover debt. Although IRS tax liens can be strenuous, an experienced tax attorney can help to release a tax lien or to stop the IRS from refiling a lien.
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