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The IRS has a Fresh Start program whereby you can ask that it remove your lien after you pay it in full. There is a form you will need to complete. Then, when the IRS withdraws the lien you will need to get that information to all three of the credit-reporting bureaus. If you do so, the three bureaus will most likely delete it from your file and it will no longer appear in your credit report.
The best plan
If you think you may be hit with an IRS tax lien on your house, the best idea is to sell it before the lien is triggered. If you can't do that, here are the options.
- Pay the bill and then ask the IRS to withdraw the lien
- Do an installment plan. If you owe less than $50,000 and agree to an installment plan, the IRS will withdraw your lien
- Set up a direct debit from your checking account or your employer and then send the IRS a form requesting that it withdraw the lien. You will need to make at least three payments and it may take as long as three months before the lien is removed.
- Sell the house. In the event you have sufficient equity in your house to take care of your tax bill, you could sell the house and use the proceeds to discharge the lien. In this event, you would need to have complete documentation you could send to the IRS. In the event you didn't have sufficient equity, you can still request that the lien be released. This is because it’s possible the IRS will accept a part payment.
Finally, here’s a video with information about IRS tax liens and how to deal with them.