How to File IRS Form 12277 to Withdraw a Tax Lien
A federal tax lien can be removed from public record under specific conditions. Learn the purpose of Form 12277 and the logic behind a successful application.
IRS Form 12277, Application for Withdrawal of Filed Form 668(Y), is a request to the IRS to remove a public Notice of Federal Tax Lien. A federal tax lien is the government’s legal claim against your property for an unpaid tax debt, and the public notice alerts creditors and can negatively impact your credit. Filing Form 12277 begins the process of clearing this notice from public records.
Eligibility for Lien Withdrawal
To qualify for a lien withdrawal, a taxpayer must meet specific conditions outlined by the IRS. One primary reason for withdrawal is if the Notice of Federal Tax Lien was filed prematurely or not in accordance with the agency’s internal procedures. This could happen if the notice was issued before the taxpayer had a chance to respond to initial balance due notices or if other procedural errors occurred.
The IRS may also grant a withdrawal if it will facilitate the collection of the tax liability. For instance, a taxpayer might need the lien removed to secure a loan to pay off the outstanding tax balance in full. A withdrawal can also be approved if it is in the best interest of both the taxpayer and the government. This applies to situations where the lien creates significant economic hardship for the taxpayer without providing a collection benefit to the government.
A withdrawal removes the public Notice of Federal Tax Lien from the public record, and the IRS will treat the notice as if it were never filed. This does not, however, eliminate the underlying statutory lien or cancel your tax debt. In contrast, a lien discharge removes the lien from a specific piece of property, such as a house you are trying to sell. Lien subordination does not remove the lien but allows another creditor to move ahead of the IRS in line to be paid, which is often necessary to refinance a mortgage.
Under the Fresh Start initiative, taxpayers may qualify for a withdrawal even after the tax liability is paid. To do so, you must be in full compliance with all tax obligations for the preceding three years, including filing all required returns and being current on estimated tax payments. For those with an outstanding balance, entering a Direct Debit Installment Agreement for debts of $25,000 or less can also lead to a withdrawal after three consecutive payments have been made, provided the agreement will pay the debt within 60 months or before the collection statute expires.
Information and Documentation for Form 12277
Before completing Form 12277, you must gather specific information. You will need your full name, current address, and taxpayer identification number (SSN for individuals or EIN for businesses). You also need the details of the tax lien, which are found on the Form 668(Y), Notice of Federal Tax Lien, that you received.
On line 11 of the application, you must state the reason for your withdrawal request. You will need to check the box that corresponds to your eligibility criteria, such as the lien being filed improperly or your enrollment in a Direct Debit Installment Agreement. You must also provide a detailed written explanation supporting your selected reason.
You must include a copy of the Form 668(Y) with your application. Depending on the reason for your request, other documents may be required, including:
- A copy of your signed Installment Agreement
- Proof of recent tax payments
- Financial statements that demonstrate how withdrawing the lien will help you pay the tax debt
- Copies of tax returns from the past three years if you are claiming tax compliance
The most current version of Form 12277 can be downloaded from the official IRS website. Using the latest version is important as forms can be updated periodically.
Submitting Your Application
The completed application package should be mailed to the IRS office assigned to your account. If you are unsure where to send it, the IRS provides designated addresses for lien processing based on where you live or have your principal place of business. Sending the application to the correct office helps avoid significant processing delays.
The IRS review process can take several months to complete, and the timeline can vary depending on the complexity of your case. During this period, the IRS may contact you if they require additional information. You should keep copies of the entire application package for your records.
The IRS will notify you of its decision in writing. If your request is approved, the IRS will file Form 10916, Withdrawal of Filed Notice of Federal Tax Lien, with the same recording office where the original lien was filed. If your request is denied, the notification letter will explain the reasons and inform you of your right to appeal the decision.
The IRS does not automatically notify credit reporting agencies of the withdrawal. You may submit a written request asking the IRS to send a copy to specific creditors or financial institutions. While major consumer credit bureaus no longer include federal tax lien information on credit reports, a lien remains a public record that can be found during background checks for a mortgage or security clearance.