Resolving Tax Liens: Removal, Withdrawal, and Subordination

Overview

A federal tax lien is the government’s legal claim against your property for unpaid taxes; state and local tax authorities can file similar liens. Resolving that lien typically follows one of three routes: removal (release/discharge), withdrawal (removing the public notice), or subordination (lowering lien priority). Each route serves different practical goals — full satisfaction of the debt, improved public standing for credit or sale, or enabling new financing — and each requires different paperwork and evidence. (IRS: “Understanding Tax Liens” and “How tax liens are recorded and how to get them withdrawn.”)

How federal tax liens work (brief)

• A federal tax lien arises when the IRS assesses tax, sends a Notice and Demand for Payment, and files a Notice of Federal Tax Lien (NFTL) in public records to protect the government’s interest.
• The lien attaches to current and future property and rights to property you own in the jurisdiction where the NFTL was filed. (Internal Revenue Service: “Understanding Tax Liens” — https://www.irs.gov/businesses/small-businesses-self-employed/understanding-tax-liens)
• A lien remains until the liability is fully satisfied, the lien is released or withdrawn, the property is discharged, or the collection statute of limitations expires (generally 10 years from assessment, subject to extensions).

What’s the difference: removal (release/discharge), withdrawal, and subordination

• Removal (Release/Discharge): The IRS issues a release or discharge when the underlying tax debt is paid in full, or the IRS otherwise determines the lien should terminate as to the taxpayer or a specific parcel of property. A release clears the government’s claim; a discharge removes the lien from a particular property while leaving it attached to other property. (See: IRS procedures on discharge/release.)

• Withdrawal: A withdrawal removes the public Notice of Federal Tax Lien from the public record. It does not eliminate the underlying tax liability — you still owe and must pay — but it can repair credit perception and ease property transfers and refinancing because lenders and third parties no longer see the public filing. The IRS will consider withdrawal when it benefits both the taxpayer and tax administration, such as when the lien was filed prematurely or the taxpayer enters certain direct-debit installment agreements. (IRS: “How tax liens are recorded and how to get them withdrawn.”)

• Subordination: A certificate of subordination leaves the lien in place but changes its priority so a new loan or lien can take precedence over the IRS lien. Subordination is commonly requested to permit a mortgage refinance or a home equity loan. The IRS issues a Certificate of Subordination when the proposed new debt provides adequate protection for the government’s interest and when subordination is in the best interest of tax administration.

(For additional details on the procedures for subordination and withdrawal, see FinHelp’s guides: “How Tax Liens Are Recorded and How to Get Them Withdrawn” and “Subordinating a Federal Tax Lien.”)

When to use each option (practical guidance)

• Use removal (release/discharge) when you can pay the debt in full, or when the tax is erroneous and you have documentation that leads the IRS to release it. A full payment is the cleanest and most final solution.
• Request withdrawal when you need the public notice removed quickly to qualify for a mortgage, refinance, or business financing and you can meet IRS criteria (for example, entering an approved installment agreement that meets withdrawal rules). Withdrawal is particularly useful when the obligation remains but the NFTL filing is creating an outsized barrier to credit.
• Seek subordination when you cannot pay the tax immediately but need new financing — subordination can permit a lender to take first priority while the IRS remains secured behind it.

Step-by-step checklist: How to request each resolution

• Confirm the lien: order a tax account transcript from the IRS or check county recorder filings. Get the NFTL file number and the tax periods involved.
• Gather supporting documents: payoff letters, loan commitment or refinance approval, sales contract, proof of installment agreement or direct debit set-up, and identity and title documents for the property.
• Contact the IRS office that filed the NFTL: often the Centralized Lien Operations (CLO) or local Revenue Officer. The IRS has centralized procedures for discharge, subordination, and withdrawal requests. (See IRS guidance linked below.)
• For a release/discharge: provide proof of payment or arrange for payment (payoff letter from the IRS or bank wire confirmation). The IRS will issue a release when the tax is satisfied.
• For a withdrawal: show that withdrawal is in the best interest of tax administration and will not prejudice the government (for example, evidence of an approved direct-debit installment agreement or that the lien was filed prematurely). The IRS will consider the request and, if approved, remove the NFTL from public record.
• For subordination: submit the lender’s request or your request with the lender’s underwriting, commitment letter, and evidence that the new loan secures funds that will not be used to pay the IRS. The IRS will evaluate whether it protects its interest.
• Allow time: administrative processing and recording/filing with county offices adds days or weeks. Typical IRS processing times vary — plan for several weeks for subordination and withdrawal, and up to 30 days or more for releases to appear in local records after IRS action.

Documents lenders and title companies typically require

• A current title report showing the tax lien and its recording information.
• A Certificate of Subordination, Certificate of Discharge, or a Withdrawal letter from the IRS (if applicable).
• Lender payoff statement or commitment letter if the transaction depends on lien action.

Common mistakes and misconceptions (and the corrections)

• Mistake: “A payment plan automatically removes the lien.” Correction: An installment agreement does not automatically release a filed lien. Withdrawal may be possible in certain installment agreement situations, but the NFTL generally remains until the liability is satisfied or the IRS approves withdrawal. (IRS guidance.)
• Mistake: “Tax liens stay on credit reports for seven years.” Correction: Starting in 2018, the nationwide consumer reporting agencies largely removed public-record tax liens from credit reports, so tax liens normally do not appear on regular consumer credit reports today. However, public records and title searches still reflect recorded liens and lenders often rely on those sources. (Consumer Financial Protection Bureau and major credit bureaus.)
• Mistake: “Subordination removes the lien.” Correction: Subordination changes only priority; it leaves the lien in place and does not reduce or remove the taxpayer’s obligation.

Timelines and costs

• Timing varies: a release after full payment can be recorded quickly once the IRS processes payment, but county recording updates may take additional days. Withdrawal and subordination requests typically take several weeks. Expect communication back-and-forth if the IRS needs clarifying documents.
• Fees: the IRS doesn’t charge special fees for issuing a release, withdrawal, or certificate of subordination, but you or your lender may incur title company, recording, or attorney fees.

Real-world examples (anonymized)

• Example 1: A homeowner with a $20,000 federal tax liability entered a direct-debit installment agreement and, after meeting the IRS’s conditions and providing proof of the agreement, qualified for a withdrawal of the NFTL. The withdrawal removed the public notice and allowed the homeowner to refinance at a lower rate while continuing to pay the installment plan.
• Example 2: A small business owner needed a commercial loan to expand. Paying the IRS in full wasn’t possible immediately, so we coordinated with the lender and requested a Certificate of Subordination. The lender accepted the subordination, issued the loan, and the business used new loan proceeds to grow revenue and gradually address the tax debt.

Frequently asked questions (accurate, up-to-date answers)

• How long does a tax lien last? A federal tax lien remains until the debt is paid and the IRS issues a release, the lien is withdrawn, the property is discharged from the lien, or the IRS’s collection statute of limitations (generally 10 years from assessment, unless extended) expires. (IRS: “Understanding Tax Liens”)

• Will a tax lien appear on my consumer credit report? Major consumer credit reporting agencies removed most public-record tax liens from consumer credit reports beginning in 2018, so tax liens typically do not show on standard credit reports today. Lenders and title companies still see public-record filings through local searches and specialty services.

• Can I sell or refinance a property with a tax lien? You can, but the lien must be handled: pay it in full, obtain a discharge for the specific property, request a withdrawal of the NFTL (if allowed), or secure a subordination so the new lender takes priority. Each option has different eligibility and documentation requirements.

Practical tips from a CPA (15+ years of experience)

• Act early: contacting the IRS as soon as you learn a lien is filed preserves options and reduces the chance of blocked transactions.
• Get written confirmations: always obtain written IRS letters for withdrawals, subordinations, or releases and have your title company verify recording updates.
• Use professionals: a CPA or tax attorney with lien experience can coordinate with lenders and the IRS to present the strongest, fastest request.

Authoritative resources and further reading

• IRS — Understanding Tax Liens: https://www.irs.gov/businesses/small-businesses-self-employed/understanding-tax-liens
• IRS — How tax liens are recorded and how to get them withdrawn: https://finhelp.io/glossary/how-tax-liens-are-recorded-and-how-to-get-them-withdrawn/ (FinHelp summary of IRS procedures)
• FinHelp — Subordinating a Federal Tax Lien: https://finhelp.io/glossary/subordinating-a-federal-tax-lien/
• FinHelp — How Tax Liens Affect Your Credit and Property Sales: https://finhelp.io/glossary/how-tax-liens-affect-your-credit-and-property-sales/
• Consumer Financial Protection Bureau — background on public records and credit reporting practices.

Professional disclaimer

This article is educational and does not replace personalized tax or legal advice. Procedures and eligibility for release, withdrawal, or subordination vary by case. Consult a qualified CPA or tax attorney to evaluate options specific to your situation and to prepare or review documents before you submit them to the IRS or a lender.