A federal tax lien, sometimes called a "statutory
lien," is the government's legal claim against a
taxpayer's property when the taxpayer neglects or fails to pay
a tax debt. To provide notice to creditors, the IRS files a public
document, Form 668(Y), Notice of Federal Tax Lien.
Internal Revenue Code (IRC) § 6323(j) provides the Internal
Revenue Service (IRS) with the authority to withdraw a Notice of
Federal Tax Lien (NFTL) under certain circumstances. A withdrawal
removes the public NFTL, which assures creditors that the
government is not competing with them for a taxpayer's
property. However, a withdrawal does not extinguish the
taxpayer's outstanding tax liability.
A taxpayer's request for a withdrawal must be made in
writing. Generally, a taxpayer requests the withdrawal using Form
12277, Application for Withdrawal of Filed Form 668(Y), and
Notice of Federal Tax Lien.
