Overview

A federal tax lien signals the government’s legal claim on your property to secure unpaid taxes. Two common remedies when a lien stands in the way of credit or a real‑estate transaction are a withdrawal and a subordination. A withdrawal removes the public Notice of Federal Tax Lien (makes the filing act as if it never happened for most third‑party viewers), while a subordination lets another creditor take priority over the federal lien so lenders will move forward with loans or refinances.

Key IRS forms and pages

Step-by-step checklist (practical workflow)

  1. Confirm the lien details. Order or review your IRS account transcript and the filed Notice of Federal Tax Lien to confirm tax periods, amounts, and filing date.
  2. Decide whether withdrawal or subordination best meets your goal. Withdrawals are stronger for credit repair or clearing a public record; subordinations are common for refinances or new mortgages when the lien remains.
  3. Gather supporting documents (see list below).
  4. Complete the correct IRS form: Form 12277 for withdrawal or Form 14135 for subordination. Follow the form instructions exactly.
  5. Prepare a concise cover letter explaining the requested remedy and the reason (e.g., refinance closing statement, lender request, proof of payment, or financial hardship documentation).
  6. Submit the package to the IRS address listed in the form instructions or the unit that filed the lien. Keep certified‑mail receipts or electronic confirmations.
  7. Follow up with the IRS or the assigned Case Resolution Technician if you don’t receive an acknowledgment within the timeframe noted on the form instructions.

Documents to assemble

  • A complete, signed Form 12277 or Form 14135 (as applicable).
  • Proof of tax payment(s) or payment arrangement (e.g., paid in full receipt, installment agreement confirmation).
  • For a withdrawal: evidence that withdrawal meets IRS criteria (timely filed tax returns, paid tax, or an installment agreement in good standing) and a letter explaining why withdrawal will facilitate collection (e.g., lender required withdrawal to close a refinance).
  • For subordination: lender’s written request (payoff or loan documents), current title report or preliminary HUD/closing statement, and contact info for the lender/title company.
  • Identification and authorization documents if a third party (attorney or tax pro) files on your behalf.

Timing and what to expect

  • Processing times vary: small, straightforward requests can take several weeks; more complex cases (multiple tax periods, disputes, or lien-related notices) can take a few months. The IRS instructions note that processing times depend on workload and case complexity (IRS forms pages above).
  • A withdrawal removes the public notice from county or state records and helps with credit reporting but does not relieve the underlying tax liability.

Practical tips from experience

  • Be proactive: lenders often need a subordination or withdrawal before closing. Ask the lender whether they will accept subordination or require full withdrawal and get that in writing.
  • Include a short lender cover letter and contact name/phone to speed review.
  • If you’re on an installment agreement, verify the agreement is in good standing and cite the agreement number on your form.
  • Keep copies of everything and use certified mail or tracked delivery when submitting documents.

Common mistakes to avoid

  • Filing the wrong form (people sometimes confuse release, withdrawal and subordination). A release (Certificate of Release of Federal Tax Lien) is issued when the liability is fully satisfied; withdrawal is a separate administrative action. See FinHelp’s guide on obtaining a certificate of release for more detail: How to Obtain a Certificate of Release of Federal Tax Lien.
  • Assuming payment alone clears public record immediately. You must still request withdrawal or release depending on circumstances.
  • Not providing the lender’s request or closing documents when asking for subordination — that usually delays decisions.

When to consider other tax relief options

If you cannot pay in full but need lien relief to obtain credit, consider whether an offer in compromise or a structured installment agreement under IRS Fresh Start provisions makes sense. See related guidance on alternatives: When an Offer in Compromise Is a Realistic Option and options for installment agreements under the Fresh Start program: How the Fresh Start Program Affects Liens, Levies, and Installment Agreements.

Short FAQ

  • Will a withdrawal erase the tax debt? No. A withdrawal removes the public Notice of Federal Tax Lien but does not remove the underlying liability or stop collection actions if taxes remain unpaid.
  • Can the IRS refuse? Yes. The IRS will deny a withdrawal or subordination if it determines the action would impede tax collection or if required conditions aren’t met.
  • Can a state lien be withdrawn or subordinated the same way? State processes vary; contact your state revenue agency for forms and procedures.

Next steps

  1. Review the IRS form pages for Form 12277 and Form 14135 and the instructions linked above.
  2. Gather the documents listed and draft a short cover letter explaining the goal (withdrawal vs subordination).
  3. If your situation is complex — multiple liens, unpaid balance disputes, or bankruptcy history — consult a tax attorney or enrolled agent to avoid costly mistakes.

Related reading on FinHelp

Professional disclaimer

This article is educational and reflects general best practices as of 2025. It is not a substitute for personalized legal, tax or financial advice. In my practice advising clients on lien issues, outcomes depend on case facts and IRS discretion — consult a qualified tax professional for guidance tailored to your situation.

Authoritative sources

IRS, About Form 12277: https://www.irs.gov/forms-pubs/about-form-12277
IRS, About Form 14135: https://www.irs.gov/forms-pubs/about-form-14135
IRS, Notice of Federal Tax Lien: https://www.irs.gov/businesses/small-businesses-self-employed/notice-of-federal-tax-lien