IRS Form 12277: Requesting a Federal Tax Lien Withdrawal

Taxpayer's Guide to Form 12277: Application for Withdrawal of Filed Form 668(Y)

A lien withdrawal is when the IRS removes a federal tax lien from the public record. This can happen if you pay the tax liability in full or get the IRS to release the lien another way. But it can also happen in situations where you still owe the tax debt but are making payments or meet other criteria. To request a lien withdrawal, file Form 12277. Keep reading for more details, or use TaxCure to find a reputable tax professional to help you deal with IRS liens and other collection actions. 

Key takeaways

• Lien withdrawal -- The IRS removes all public record of the lien.
• When it happens -- If you pay the tax in full, settle the tax, the tax expires, or you enter into a qualifying payment agreement.
• How to request -- Use Form 12277 to request lien withdrawal.

What Is a Lien Withdrawal?

 A withdrawal is when the IRS removes all public records of the tax lien. The IRS can also contact any interested parties to let them know the lien has been withdrawn -- for example, creditors. A withdrawal can happen if the lien has been released or if it is still active. 

Lien withdrawal after release

When a lien is released, it means that you no longer owe the debt associated with the lien. The IRS releases liens if you pay the tax in full, pay a settlement through the offer in compromise program, or establish that you didn't owe the tax. The IRS also releases the lien once the collection period expires. However, even though the lien has been released, there's still a public record of it. The record indicates that the lien was released, but creditors can still see that there was a tax lien against you.

Generally, the IRS will agree to withdraw a released lien if you've filed the last three years of returns on time and are compliant with all payment requirements, including current year estimated tax payments and payroll deposits if you have employees. 

Withdrawal of an open lien

The IRS may withdraw an open (active) lien if you meet these criteria: 

• You owe less than $25,000,
• You set up an installment agreement with direct debit payments, and
• You make three monthly payments.

There may be other situations where the IRS will withdraw an open tax lien if doing so helps the government collect the debt or if it's otherwise in the best interest of everyone involved. However, those cases are typically decided on a case-by-case basis, and to request a withdrawal, you need to file Form 12277.

What is IRS Form 12277?

IRS Form 12277 is the form you use to request a withdrawal of a federal tax lien. It requires your personal details, the reason for the withdrawal, and the current status of the tax lien. A withdrawal removes the public Notice of Federal Tax Lien (NFTL) and any other public records of the tax lien. Often, taxpayers request a withdrawal after they no longer owe the tax debt, but in some cases, you may request a withdrawal even if the tax debt is still active. In those situations, the withdrawal does not eliminate the tax debt. 

What is the public record of a tax lien?

The public record of a federal tax lien is called a Notice of Federal Tax Lien. The IRS uses an NFTL to record the federal tax lien in your home state. 

How can a lien still exist after a withdrawal?

Again, a lien withdrawal simply removes the public record of the lien. The withdrawal effectively "deletes" the NFTL. But the lien still exists. Under federal law, the IRS has a statutory lien on a taxpayer’s property after a tax liability is 10 days past due. That means that the IRS has an automatic tax lien as soon as you're 10 days behind on your tax bill. However, that lien isn't public record until the IRS files the NFTL. By extension, if the IRS removes the NFTL, the lien can still exist.

 

 

How to Fill Out Form 12277

The form is relatively short. If you're confused about what to include, you should contact a tax professional. In the meantime, here is an overview of how to complete this form.

Sections 1-8 - Your name, Social Security Number, address, contact details, and your tax pro if applicable.

Section 9 - Details about Form 668(Y) (The Notice of Federal Tax Lien), including serial number, date filed, and office where filed. Attach a copy of Form 668(Y) if you have it. If you don't have these details, you can leave this section blank. 

Section 10 - Choose one of the following options for the status of your tax lien: open, released, or unknown. Open means that you still owe the tax debt, and released means that you no longer owe it. 

Section 11 - Select one of the following reasons for requesting a withdrawal:

• The lien was filed prematurely or without meeting the IRS's procedural requirements.
• You set up an installment agreement and are making direct debit payments.
• Withdrawal will help the IRS collect the tax. 
• Withdrawal is in the best interest of you (the taxpayer) or the government.

Section 12 - Explain the reason for the request. For example, in this section, you might include tax filing records, proof of a payment plan, documentation of an accepted offer in compromise, reasons why the withdrawal might benefit the collection of the tax, or other details.

Finally, taxpayers must sign and date the affirmation section. It gives the taxpayer’s word that what they have included in the form is true and correct.

 

Sending and Getting Notified by the IRS

Taxpayers will then submit the form to the IRS via certified mail. Within 30-45 days, you should hear back from the IRS. The response will come in the form of a confirmation to approve or deny your request to withdraw the federal lien. If the IRS accepts your request, you will receive a copy of the withdrawal notice that the IRS will send to the local courthouse or county offices to withdraw the lien. 

What If You Don't Qualify for a Lien Withdrawal?

If you don't qualify for a withdrawal, you may want to look into other solutions, such as lien discharge, appealing the lien, or lien subordination. Here is a breakdown of when these options might be able to help you and how they work.

Here is a breakdown of when these options might be able to help you and how they work.

Get Help With Lien Withdrawal

If you're dealing with a tax lien, you need a tax resolution specialist -- but unfortunately, a lot of the big tax relief companies that make the "best of" lists are not able to provide you with high-quality help customized to your situation. To get that, you need to work with a local tax pro. TaxCure is designed to help you find tax professionals who have the exact experience you need to solve your tax problems. Don't delay -- if you're facing IRS tax liens or other collection actions, find help today. Start your search on this page, and then narrow down the results to find the right pro for your needs.

Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific help regarding your tax situation, contact a licensed tax professional or tax attorney.