Form 12277: Withdrawal of Filed Notice of Federal Tax Lien

A federal tax lien is the government’s legal claim against a taxpayer’s property when unpaid taxes remain on their account. Once the Internal Revenue Service (IRS) files a Notice of Federal Tax Lien (NFTL), that lien attaches to current and future property until the tax liability is resolved. Even though tax liens no longer appear on consumer credit reports from major bureaus, they remain public records that financial institutions, employers, and secured creditors can still access. For an overview of how liens work and their effects, see IRS: Understanding a Federal Tax Lien. For many taxpayers, this public notice can create obstacles to obtaining additional credit, refinancing a home, or running a business.

Form 12277, officially titled Application for Withdrawal of Filed Notice of Federal Tax Lien, is the IRS form used to request removal of that public notice under certain circumstances. A lien withdrawal removes the NFTL from public records, even though the underlying tax debt may still exist. This differs from a lien release, which occurs only when you fully pay the balance and the IRS no longer has a legal interest in your property. Understanding the distinction between these remedies is critical because a withdrawal can help restore financial flexibility even before the tax balance is paid in full.

This guide is designed for individuals and minor business owners navigating tax collection issues. Whether you are under a payment plan such as a direct debit installment agreement, recently entered bankruptcy proceedings, or simply meet IRS criteria for relief, knowing how to file a withdrawal request is essential. The sections explain eligibility, step-by-step instructions, submission methods, and practical examples so taxpayers can confidently approach the withdrawal process.

Understanding Form 12277 and Federal Tax Lien Withdrawal

A tax lien gives the Internal Revenue Service (IRS) a legal interest in a taxpayer’s property until the tax debt is paid. When the IRS files a Notice of Federal Tax Lien (NFTL), that filing becomes a public notice of the government’s claim, alerting other secured creditors that the IRS has priority. This can affect taxpayers' ability to obtain loans, sell property, or maintain certain business relationships. Form 12277 is the official IRS form that allows taxpayers to submit a written request for withdrawal of the filed notice.

Under Internal Revenue Code §6323(j), the IRS can withdraw an NFTL when specific conditions are met. The Internal Revenue Manual explains that lien withdrawal serves several vital purposes. It removes a public notice that may unnecessarily harm a taxpayer’s financial situation, corrects administrative procedures when a lien was filed prematurely, and promotes voluntary compliance when taxpayers agree to installment payments. 

For the official IRS rules and detailed guidance, see IRM 5.12.9—Withdrawal of Notice of Federal Tax Lien, which outlines the legal authority and procedures for processing these requests. Importantly, a lien withdrawal does not erase the tax liability itself but changes how the lien is viewed by third parties such as banks and financial institutions.

It is also essential to distinguish between lien withdrawal and lien release. A lien withdrawal removes the public notice from the record, but the debt continues until it is fully paid or otherwise resolved. A lien release, by contrast, occurs when the tax balance is fully paid, the collection statute expires, or IRS procedures require that the lien no longer apply. Both remedies improve taxpayers' standing but operate under different rules and circumstances.

When to Use Form 12277: Eligibility and Limitations

The Internal Revenue Service only allows taxpayers to request lien withdrawal in certain circumstances. Form 12277 can be filed when the IRS decides that removing the Notice of Federal Tax Lien (NFTL) supports the government’s collection efforts and the taxpayer’s financial position. Understanding when this form applies and does not is critical before submitting a withdrawal request.

Four Statutory Conditions for Withdrawal

According to Internal Revenue Code §6323(j), the IRS may approve a withdrawal if at least one of the following conditions is met:

• Premature or Improper Filing: The NFTL was filed before required IRS procedures were completed, such as during a bankruptcy proceeding or before proper taxpayer contact. A lien filed in error may also qualify for withdrawal under this condition.
• Installment Agreement in Place: A taxpayer entered into an installment agreement to pay the tax balance fully, and the deal does not require an active lien. Special rules apply to a direct debit installment agreement where three consecutive direct debit payments have been made.
• Withdrawal Facilitates Collection: Removing the public notice improves the IRS’s ability to collect the tax debt. Examples include situations where withdrawal allows refinancing, the sale of property, or access to employment that generates income.
• Best Interest of Both Parties: The IRS determines that withdrawal is in the best interest of both the taxpayer and the government. This may involve recommendations from the IRS Independent Office of Appeals or the Taxpayer Advocate Service.

When Not to Use Form 12277

• To improve credit history alone (credit reporting agencies no longer list tax liens).
• To avoid paying unpaid taxes without a qualifying payment plan.
• When the NFTL was filed correctly, no statutory conditions were applied.
• When a lien release is more appropriate, such as after the taxpayer has fully paid the liability.

Who Can File

• Individuals named on the filed notice.
• Businesses with federal tax deposits or payroll deductions are subject to a lien.
• Authorized representatives, such as a tax attorney or tax professional, with a valid power of attorney.

Common Restrictions and Denial Triggers

• Noncompliance with current filing requirements or estimated tax payments.
• Requests are based solely on the taxpayer's inconvenience.
• The collection would be jeopardized if the withdrawal is granted.

Before submitting Form 12277, taxpayers should carefully evaluate whether their circumstances fit one of these statutory conditions. Doing so increases the likelihood that the IRS will approve the withdrawal process.

Step-by-Step Instructions for Completing Form 12277

Completing Form 12277 requires accuracy and supporting evidence. A simple error or missing document can delay or even result in rejection of your withdrawal request. The following guidance walks you through the form, section by section, with practical tips to improve your chances of approval.

Required Information Checklist

Before filling out the form, gather these essentials:

• Taxpayer information: legal name, mailing address, and taxpayer identification number.
• NFTL details: Serial number, date, and recording office from the filed notice.
• Withdrawal basis: One of the four statutory conditions under Internal Revenue Code §6323(j).
• Third-party authorization: Creditors, financial institutions, or other parties you wish the IRS to notify.
• Supporting documentation: Proof of installment agreement, bankruptcy filing records, loan denial letters, or other evidence, depending on your situation.

Having this information in advance ensures a smoother withdrawal process.

Line-by-Line Guidance

• Section 1 – Taxpayer Information: Enter your full legal name as it appears on the filed notice. Use the Social Security Number (SSN) for individuals or the Employer Identification Number (EIN) for businesses. Please share your current mailing address so we can ensure accurate correspondence.
• Section 2 – Lien Information: List the NFTL serial number from the top of the filed notice. Please identify the recording office and the date of filing. Attach a continuation sheet with details for each if you have multiple liens.
• Section 3 – Basis for Withdrawal: Select the applicable condition, such as premature filing, installment agreement, facilitated collection, or best interest. Could you please provide a detailed explanation? Avoid vague phrases such as “hurting my credit.” Instead, explain how withdrawal will allow you to obtain additional credit, refinance property, or remain compliant with tax collection.
• Section 4—Third-Party Authorization: Specify whether the IRS may notify creditors, financial institutions, or all secured creditors. This disclosure helps ensure that public records accurately reflect the withdrawal.
• Signature and Date: Individuals must sign personally. Businesses require signatures from authorized officers, such as a corporate officer or managing member of an LLC. Representatives must attach a valid Power of Attorney form (Form 2848).

Supporting Documentation

The IRS often denies withdrawal requests because taxpayers fail to include adequate evidence. Depending on your situation, provide:

• Installment agreement cases: Copy of Form 433-D or agreement letter, proof of installment payments, and bank records showing three consecutive direct debit payments.
• Premature or improper filing: Bankruptcy court documents, administrative procedures showing IRS errors, or proof that tax was already paid.
• Collection facilitation: Loan denial letters, employment offers requiring a clean credit history, or property sale contracts showing withdrawal will generate funds.
• Best interest cases: Financial hardship records, referral from the Taxpayer Advocate Service, or analysis showing taxpayer and IRS withdrawal benefits.

Please attach copies of these documents to strengthen your withdrawal request.

How to Submit Form 12277

After completing Form 12277 and attaching all supporting documentation, the next step is to submit it to the appropriate IRS office. Because the Internal Revenue Service reviews withdrawal requests carefully, following proper procedures ensures your request is not delayed or rejected.

Accepted Submission Methods

• Mail: If a revenue officer is assigned to your case, send the written request directly to that officer. If no officer is assigned, mail the form to the appropriate IRS Collection Advisory Group. To find the correct mailing address, consult IRS Publication 4235: Collection Advisory Group Addresses.
• Fax: Taxpayers may submit Form 12277 by fax to the appropriate Collection Advisory Group. If you are working with a revenue officer, use the fax number provided by that office.
• In-Person Delivery: You may hand-deliver the form to a local IRS office. Bring all supporting documentation, government-issued identification, and any power of attorney forms if a representative is filing on your behalf.

Currently, the IRS does not accept electronic submissions for Form 12277. All requests must be mailed, faxed, or delivered in person.

Signature Requirements

• Individuals must personally sign and date the form.
• Married couples are encouraged to have both spouses sign if the NFTL affects joint property.
• Businesses must have an authorized officer, partner, or managing member sign.
• Representatives may sign only if a valid Form 2848 (Power of Attorney) is on file.

Processing Timeline and Review

• The IRS generally conducts an initial review within 21 days.
• If more information is needed, you will have 30 days to respond.
• A decision is typically issued within 30 days of the request's completion, though complex cases may take longer.
• If approved, the IRS files Form 10916, notifying the public records that the lien has been withdrawn.

Submitting the form through the proper channel and providing all required information increases the likelihood of a smooth and timely withdrawal process.

Related Relief Options Beyond Form 12277

While Form 12277 is a powerful tool for removing a Notice of Federal Tax Lien (NFTL) from public records, it is not the only option available to taxpayers. The Internal Revenue Service offers several forms of lien relief that may apply in different circumstances. Understanding these alternatives helps ensure you choose the proper remedy for your situation.

• Lien Release: A lien release occurs when the tax liability is fully paid or resolved. Once the IRS decides the debt has been satisfied, it issues a certificate of release. Unlike a lien withdrawal, which only removes the public notice, a release eliminates the government’s legal claim.
• Lien Subordination: Subordination does not remove the lien but allows another creditor to take priority over the IRS. This option can enable refinancing or obtaining a loan, which may provide funds to pay the tax balance.
• Lien Discharge: A discharge removes the lien from specific property. This is often used when selling or refinancing property, ensuring that the transaction can proceed even though other assets remain subject to the IRS lien.
• Interaction with Payment Plans and Offers in Compromise: Taxpayers who enter into an installment agreement, such as a direct debit plan, or who submit an Offer in Compromise, may see additional opportunities for lien withdrawal or release. IRS procedures vary, but compliance with filing requirements and consecutive payments is essential.

Choosing between withdrawal, release, subordination, or discharge depends on the relief you need. Sometimes, multiple remedies may apply, and a tax professional or attorney can help determine the best option.

How Lien Withdrawal Affects Collections and Credit

Withdrawing a Notice of Federal Tax Lien can significantly change how taxpayers interact with creditors, employers, and financial institutions. However, it is essential to understand what a lien withdrawal does—and does not—accomplish.

IRS Collection Actions

• A lien withdrawal removes the public notice but does not erase the tax liability. The IRS retains its authority to collect unpaid taxes through tools such as wage levy, bank levy, or seizure of personal property.
• Taxpayers must comply with filing requirements and installment payments to avoid enforcement actions. If a taxpayer defaults on a payment plan, the IRS may refile a lien or pursue other collection options.

Impact on Credit and Financing

• Since 2018, consumer credit reports no longer display federal lien filings. However, liens remain part of public records, and lenders, landlords, or other secured creditors can still discover them.
• A successful withdrawal request can reduce barriers when applying for loans, refinancing property, or securing lines of credit. Financial institutions may view the absence of an active lien more favorably when evaluating credit history.
• Removing such notice may also improve business relationships, especially for small companies that rely on vendor credit or professional licensing.

Employment and Business Operations

• Some employers perform background or credit checks that uncover public records. A lien withdrawal can eliminate potential obstacles to employment in sensitive financial or government positions.
• For businesses, lien withdrawal may restore contract eligibility, reduce risk with bonding companies, and make obtaining additional credit for operations or expansion easier.

Collection Statute Expiration Date (CSED)

• The Collection Statute limits IRS collection efforts to 10 years from the assessment date.
• A lien withdrawal does not stop this collection statute from running, but it may affect how IRS procedures are applied. Taxpayers near the end of the statute should seek professional advice before requesting withdrawal.

By removing the public notice, a lien withdrawal offers taxpayers a chance to rebuild their financial standing while still addressing tax collection responsibly.

Common Mistakes and Reasons for Rejection

Even when taxpayers meet the eligibility criteria, Form 12277 applications are often delayed or denied due to preventable errors. Recognizing the most common issues can help strengthen your withdrawal request.

Top Application Mistakes

• Incomplete or missing information: Leaving out the NFTL serial number, taxpayer identification number, or signature can cause immediate rejection.
• Insufficient legal basis: Vague explanations such as “improving my credit” do not satisfy IRS procedures and fail to meet statutory conditions.
• Missing supporting documentation: Submitting the form without proof of payments, bankruptcy filings, or loan denial letters weakens your request.
• Wrong submission location: Mailing the application to the wrong IRS office instead of the revenue officer or collection advisory group leads to delays or returns.
• Timing problems: Filing while out of compliance with tax return requirements, estimated tax payments, or installment agreements reduces the chances of approval.

Frequent Rejection Reasons

• No statutory condition met: The IRS will not withdraw a lien if no qualifying circumstances apply.
• Noncompliance: Failure to stay current with filing obligations or installment payments is a common denial trigger.
• Collection jeopardy: The request is rejected if granting withdrawal would endanger IRS tax collection.
• Technical issues: Missing signatures, incomplete identification, or failure to submit a written request often result in rejection before the case is reviewed.

How to Fix Mistakes

• Review IRS instructions carefully: Ensure every field is complete and accurate before submission.
• Attach required documentation: Provide all supporting evidence that verifies your withdrawal basis.
• Resubmit or appeal if denied: Correct errors, reapply, or use a Collection Appeal Request for further review.

By avoiding these mistakes, taxpayers improve the likelihood that the Internal Revenue Service will approve their withdrawal process.

Case Examples and Real-Life Scenarios

Understanding how Form 12277 works can help taxpayers understand how different circumstances affect the withdrawal process. The following examples illustrate everyday situations where a withdrawal request may be approved.

Direct Debit Installment Agreement:
A self-employed taxpayer owed $18,500 in income tax liability, and the IRS filed a Notice of Federal Tax Lien. The taxpayer entered into a direct debit installment agreement and made three consecutive direct debit payments. With proof of compliance and a stable payment plan, the IRS granted lien withdrawal, allowing the taxpayer to obtain additional credit for business expenses.

Small Business Financing:
A manufacturing company owed $75,000 in payroll deductions and had an active tax lien. The lien blocked access to equipment financing needed for expansion. By filing Form 12277 with documentation showing that withdrawal would facilitate tax collection and improve business income, the IRS agreed to remove the public notice. The business secured financing, increased cash flow, and paid consistent installments.

Premature Filing During Bankruptcy:
An individual in a bankruptcy proceeding discovered that the IRS filed a lien during the automatic stay period, violating administrative procedures. With court records attached to the withdrawal request, the IRS approved the withdrawal immediately, ensuring compliance with the Internal Revenue Manual and bankruptcy protections.

These scenarios demonstrate that approval depends on more than filing the form. The IRS decides based on evidence, statutory conditions, and whether the withdrawal serves the best interests of both the government and the taxpayer.

What to Do Next: Action Steps for Taxpayers

Once you understand the eligibility rules and have reviewed examples, the next step is preparing your own withdrawal request. A methodical approach will improve your chances of success and reduce the likelihood of rejection.

Step 1: Determine Eligibility
Confirm that one of the statutory conditions under Internal Revenue Code §6323(j) applies to your case. Consider whether the lien was filed prematurely, if you are in an installment agreement, if withdrawal would facilitate tax collection, or if removal is in your best interest and the IRS's.

Step 2: Gather Key Documents
Collect the filed notice, proof of installment payments, financial statements, or bankruptcy court records. If you are in a direct debit installment agreement, provide evidence of three consecutive payments. Submitting a complete packet strengthens your request.

Step 3: Prepare and Submit the Request
Fill out Form 12277 carefully, attach all supporting documentation, and sign where required. Mail, fax, or hand-deliver the form to the appropriate IRS office, as outlined in IRS procedures. Retain copies for your records.

Step 4: Consider Professional Assistance
Consult a tax professional or attorney if your case involves complex liabilities, such as federal tax deposits for a business or multiple liens across tax periods. Experienced advisors understand administrative procedures and can represent you before the IRS Independent Office of Appeals if necessary.

Following these steps creates a stronger application and demonstrates good faith compliance. A well-prepared withdrawal request helps the Internal Revenue Service decide more favorably and may restore financial flexibility sooner.

Frequently Asked Questions

What’s the difference between a lien withdrawal and a lien release?

A lien withdrawal removes the public record of a filed notice, even though the tax debt still exists. A lien release, on the other hand, occurs when the tax balance is fully paid, the collection statute expires, or the IRS no longer has a valid claim. A release eliminates the government’s legal claim, while a withdrawal only removes the public notice.

How long does it take for Form 12277 to be processed?

The IRS usually reviews a withdrawal request within 21 days. If additional documentation is required, you have 30 days to respond. Once complete, the IRS decides within about 30 days. In most cases, the process takes one to two months, though complex cases involving multiple liens or bankruptcy proceedings may take longer to resolve.

Can I submit Form 12277 online?

Currently, the IRS does not allow the electronic submission of Form 12277. Taxpayers must submit a written request by mail, fax, or in-person delivery at an IRS office. Publication 4235 lists the correct Collection Advisory Group addresses and fax numbers. Electronic filing may be considered, but only paper and fax submissions are accepted.

What happens if my withdrawal request is denied?

If your request is denied, the IRS sends a letter explaining why. You may correct errors and resubmit or file a Collection Appeal Request using Form 9423. Sometimes, you can also appeal through the IRS Independent Office of Appeals. Seeking assistance from a tax professional or attorney can improve your chances of success in challenging a denial.

Does withdrawing a lien stop all IRS collection actions?

No, a lien withdrawal only removes the public record of the filed notice, but does not eliminate the tax liability itself. The IRS retains full collection authority, including levies, wage garnishment, or seizure of personal property if the taxpayer defaults. Taxpayers must remain current on returns, installment agreements, and estimated tax payments to prevent future collection actions.