a Certificate of Release can be issued. For other forms of payment, the Certificate of Release will be issued within 30 days of the liability being satisfied. Paying your tax debt in full is the recommended way to get rid of a federal tax lien, according to IRS.gov. The IRS will release your lien within 30 days after you’ve paid your tax debt. However, other options to reduce the impact of a lien exist when factors are in both the government’s and the taxpayer’s best interest. Discharge of property. A “discharge” removes the lien from specific property. There are several Internal Revenue Code (IRC) provisions that determine eligibility. Refer to IRS Publication 783, “Instructions on How to Apply for Certificate of Discharge from Federal Tax Lien” for details. When applying for a discharge of a federal tax lien, equity is determined by establishing the balances due until the day of closing on all encumbrances recorded ahead of the IRS’ lien. Frequently, this will include the first and possibly the second mortgage and any unpaid real estate taxes, regardless of whether there has been a tax sale and any judicial liens. In addition, closing costs should be included, such as loan origination fees, points, agent commissions, attorney’s fees, and fees for recording all the relevant information. The sale price, less the playoffs for prior encumbrances and closing costs, determines the amount the IRS will demand in exchange for a Certificate of Discharge. Sometimes, a disagreement will arise as to what exactly constitutes a “prior encumbrance” or, more likely, the amount of the closing costs. For instance, while the IRS will frequently allow 6-7% agent commissions, it won’t allow more than $750 in attorney’s fees— regardless of the complexity of the transaction
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