Quick summary
If you’ve paid a federal tax debt in full or entered an IRS-approved payment plan, you can ask the IRS to withdraw the Notice of Federal Tax Lien so it’s removed from public records. The usual tool is Form 12277, Request for Withdrawal of Filed Form 668(Y), but eligibility rules and processing steps matter. Follow organized documentation, meet IRS criteria, and confirm county recorder updates after withdrawal is processed.
Why a lien withdrawal matters
A withdrawal removes the public notice (the recorded Form 668(Y)) that alerts creditors and title searchers to the IRS’s claim on your property. That makes it easier to get loans, refinance, or close real-estate transactions. Note: withdrawal is administrative relief that removes the public filing; it does not necessarily remove the underlying tax debt unless you’ve paid in full or the debt is otherwise satisfied. (See IRS guidance on lien withdrawal: https://www.irs.gov/businesses/small-businesses-self-employed/lien-withdrawal.)
Step-by-step: How to request a lien withdrawal
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Confirm the lien exists and is the IRS’s notice. Contact the local county recorder or request a transcript of account from the IRS to verify the lien’s details (tax periods, amounts, and filing date).
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Resolve or secure the debt.
- Pay the liability in full. Full payment is the clearest path to withdrawal.
- Or enroll in an IRS-approved payment plan that may qualify for withdrawal. Certain types of installment agreements—especially Direct Debit Installment Agreements (DDIA) or agreements that meet Fresh Start criteria—are more likely to qualify. The IRS’s Fresh Start information outlines typical eligibility considerations (https://www.irs.gov/businesses/small-businesses-self-employed/understanding-the-irs-fresh-start-withdrawal-of-a-notice-of-federal-tax-lien).
- Gather documentation.
- Proof of full payment (bank records, IRS payment confirmation).
- Copy of the recorded Notice of Federal Tax Lien (Form 668(Y)) you want withdrawn.
- Installment agreement documentation if you’re requesting withdrawal based on a payment plan.
- Copies of filed tax returns and any correspondence the IRS requires to show you are in compliance.
- Complete Form 12277.
- Use Form 12277, Request for Withdrawal of Filed Form 668(Y), and follow the instructions on where to send it (addresses vary by state and whether the lien is on an individual or business). See Form 12277 and its instructions: https://www.irs.gov/forms-pubs/about-form-12277.
- Provide a clear explanation why withdrawal meets the IRS criteria—e.g., “Tax debt paid in full on [date]” or “Entered into DDIA on [date] and current on payments.”
- Submit the request and supporting documents.
- Mail or fax per the Form 12277 instructions. Keep certified mail receipts or fax confirmations and keep copies of everything you send.
- Track processing and follow up.
- The IRS processing time varies by office and caseload. Many requests take 6–8 weeks but can be longer. If you don’t hear back in the expected window, contact the IRS lien office listed in your notice, or speak with a tax advocate if your case is delayed (see Taxpayer Advocate Service at https://taxpayeradvocate.irs.gov/).
- Confirm public records updated.
- After the IRS grants a withdrawal, confirm the county recorder’s office or local jurisdiction has removed the recorded Notice of Federal Tax Lien. Sometimes the county needs a copy of the IRS’s withdrawal to complete the release locally.
How withdrawal differs from release and full satisfaction
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Withdrawal: Removes the filed Notice of Federal Tax Lien from public records (the notice that’s recorded by the county). It’s an administrative action intended to reduce the adverse public credit effects while the IRS’s underlying lien (statutory lien by operation of law) may still exist until the tax is paid or otherwise satisfied.
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Release (or Certificate of Release): A release is issued when the lien no longer applies (e.g., the tax debt has been fully satisfied or otherwise legally terminated). The release shows the creditor’s claim has ended.
Both actions are helpful; withdrawal focuses on removing the public notice that damages credit and title transfer prospects. For more on related steps and requirements for removing federal tax liens, see our deeper guides: “How to Release an IRS Tax Lien: Steps and Requirements” and the Fresh Start withdrawal overview.
- How to Release an IRS Tax Lien: Steps and Requirements: https://finhelp.io/glossary/how-to-release-an-irs-tax-lien-steps-and-requirements/
- Understanding the IRS Fresh Start Withdrawal of a Notice of Federal Tax Lien: https://finhelp.io/glossary/understanding-the-irs-fresh-start-withdrawal-of-a-notice-of-federal-tax-lien/
Common scenarios and examples
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Full payment example: You pay the full tax liability with a certified bank transfer and obtain IRS confirmation. You submit Form 12277 with proof of payment. Once processed, the IRS withdraws the recorded notice and the county removes the public filing.
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Payment-plan example: You enter an IRS-approved payment plan that meets withdrawal criteria (for example, a Direct Debit Installment Agreement or an agreement meeting Fresh Start rules). You provide the agreement documentation and several months of on-time payments if required, then submit Form 12277. The IRS may withdraw the notice to ease credit issues while you continue paying.
Practical note from my practice: lenders and title companies often respond better to a withdrawal than to an unresolved recorded lien. When I’ve helped clients request withdrawals, proactively supplying clear proof of payment or active DDIA enrollment speeds decisions.
Common mistakes and how to avoid them
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Mistake: Submitting incomplete documentation. Fix: Attach the IRS payment confirmation/receipt and the recorded lien paperwork.
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Mistake: Assuming any payment plan qualifies. Fix: Verify the specific installment agreement type with the IRS; some streamlined plans don’t meet withdrawal criteria.
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Mistake: Forgetting to check county records after IRS approval. Fix: Follow up with the county recorder and provide the IRS withdrawal notice if needed to clear the recorded lien.
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Mistake: Not confirming current filing compliance. Fix: Ensure all required returns are filed—non-filed returns can block administrative actions.
How long does withdrawal take?
Processing times vary. Many taxpayers see administrative action within 6–8 weeks after submission, but heavy IRS caseloads or incomplete paperwork can extend that timeline. If you face an urgent closing or loan deadline, ask the IRS lien office for expedited handling and document the financial hardship—sometimes the IRS will prioritize time-sensitive requests.
Documentation checklist (ready-to-send)
- Completed Form 12277.
- Proof of payment (copy of cancelled check, bank confirmation, or IRS payment receipt) if paid in full.
- Installment agreement documentation (if requesting withdrawal based on a payment plan).
- Copy of the recorded Notice of Federal Tax Lien (Form 668(Y)).
- Copies of tax returns and transcripts proving filing compliance.
- A brief cover letter summarizing the request and listing enclosures.
When to get professional help
If the lien involves complex corporate filings, multiple periods, bankruptcy, or competing creditors, consult a tax attorney, enrolled agent, or CPA experienced with IRS lien practice. In my 15+ years advising clients, professional representation speeds communication, avoids errors on Form 12277, and helps negotiate solutions when eligibility is borderline.
For small business owners worried about borrowing, see our related article on how federal tax liens affect business financing: “How a Federal Tax Lien Impacts Small Business Borrowing” (https://finhelp.io/glossary/how-a-federal-tax-lien-impacts-small-business-borrowing/).
Final steps and tips
- Keep copies of everything you send and of any IRS responses.
- If the IRS approves withdrawal, confirm removal from the county recorder and credit reports where relevant.
- If the IRS denies withdrawal, read the denial carefully—there may be a path to reapply with supplemental evidence or to request relief through the Taxpayer Advocate Service.
Authoritative sources and further reading
- IRS — Lien Withdrawal (overview): https://www.irs.gov/businesses/small-businesses-self-employed/lien-withdrawal
- IRS — About Form 12277 (Request for Withdrawal of Filed Form 668(Y)): https://www.irs.gov/forms-pubs/about-form-12277
- IRS — Fresh Start Initiative information: https://www.irs.gov/businesses/small-businesses-self-employed/understanding-the-irs-fresh-start-withdrawal-of-a-notice-of-federal-tax-lien
Professional disclaimer
This article is educational and does not replace personalized tax or legal advice. Rules and IRS procedures can change; consult a qualified tax professional or attorney for advice tailored to your situation.
