A Certificate of Release of Federal Tax Lien (“Release”) is a public notice that indicates that the tax liability is no longer owed. However, the Release does not remove reference to the filing of the corresponding Notice of Federal Tax Lien (“NFTL”) from the public record. Consequently, even though the tax liability has been resolved and the Release has been obtained, a third (3rd) party can still use the NFTL in regard to an evaluation of the taxpayer’s credit worthiness.
Fortunately, the NFTL can be withdrawn by filing a Withdrawal of Notice of Federal Tax Lien (“Withdrawal”). If a Withdrawal is filed, then any reference to the NFTL, in the public record, will be removed and thus an evaluation of the taxpayer’s credit worthiness should be more favorable.
Internal Revenue Code §6323(j) provides the Internal Revenue Service (“IRS”) with the authority to file a Withdrawal, in the appropriate State recording office, and to provide the Withdrawal to any financial institution and creditor as so requested by the taxpayer.
The IRS must consider a request for a Withdrawal regardless of the filing date the NFTL. A Withdrawal is not mandatory except when the NFTL was filed in violation of the automatic stay in a bankruptcy.
Internal Revenue Manual §126.96.36.199