Fed Tax Liens - Forced Release

Fed Tax Lien - Forcing Release Thereof

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Question or Topic

Can I force the IRS to Release a Federal Tax Lien after the taxes are paid?

See also:

Tax Lien Warning - Drve v. US

Tax Lien - Gen Info & Intro

Fed Tax Liens - Forced Release

Fed Tax Lien - IRS Filing Requirements

Fed Tax Liens - Requesting Release

Federal Tax Liens - IRS Pub 1450

The Answer

Section 6325(a) of the Internal Revenue Code requires the IRS District Director to issue a certificate of release of any lien not later than 30 days after the day on which:

The IRS finds that the liability for the amount assessed, together with all interest, has been fully satisfied or has become legally unenforceable; or
The IRS accepts a bond that is conditioned upon the payment of the amount assessed with interests.

In all cases the liability for the payment of the tax continues until satisfaction of the tax in full or until the expiration of the statutory period for collection (i.e., the right to collect will usually expire after 10 years from th date of the assessment).

Section 6325(b) of the Code provides that the IRS may issue a certificate of discharge of any part of the property subject to any lien:

Where the fair market value of the property subject to the lien is at least double the amount of the unsatisfied tax liability secured by the lien in addition to the amount of all other liens upon the property which have priority over the lien; or
The IRS determines at any time that the interest of the United States in the part to be discharged has no value. The IRS is required to give consideration to the value of the part in liens that have priority over the lien of the US.

In determining the value of the property, the IRS may give consideration to the forced sale value of the property in appropriate cases.

A certificate of discharge must be requested by application in writing to the District Director and filed with the District Director and signed under penalties of perjury. The application should describe the circumstances that require the discharge, and should fully describe the particular items for which the discharge is desired. See section 301.6325-I(b) of the income tax regulations.

Section 7432(a) of the Code provides the general rule that if any employee of the IRS knowingly, or by reason of negligence, fails to release a lien under section 6325 of the Code, the taxpayer may bring a civil action for damages against the US in a District Court of the US.

Damages include:

Actual, direct economic damages sustained by the taxpayer which, but for the actions of the IRS, would not have been sustained, plus
The costs of the action.

Section 7432(e) of the Code provides that damages may not be awarded if the taxpayer did not exhaust his administrative remedies (e.g., if the taxpayer did not appeal the refusal to release or discharge the lien). However, section 301.7432-I of the income tax regulations states that the amount of actual, direct economic damages that are recoverable will be reduced "to the extent such damages reasonably could have been mitigated" by the taxpayer.

Actual and direct economic damages are actual pecuniary damages sustained by the taxpayer that would have been sustained but for an IRS failure to release a lien in accordance with section 6325 of the Code. Injuries such as inconvenience, emotional distress, and loss of reputation are compensable only to the extent they result in actual pecuniary damages.

Litigation costs and administrative costs are not recoverable as actual, direct economic damages. Injuries such as inconvenience, emotional distress and loss of reputation are compensable only to the extent that they result in actual pecuniary damages.

A civil action must be brought in Federal District Court within 2 years after the date the cause of action accrues. A cause of action accrues when the taxpayer has had a reasonable opportunity to discover all essential elements of a possible cause of action.

Solutions are dependent upon facts & circumstances, law and the objectives. These elements vary from one time to another, from one circumstance to another and from from person or entity to another

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