For years now, the IRS has allowed taxpayers in certain small-dollar Installment Agreements to petition for withdrawal of their tax liens.  This followed the lien-happy aughts when debts over $5000 got liens fairly quickly, driving down credit scores and driving up my client rolls.  After the real estate crash from 2006-whenever, the IRS took several steps to not be such a bummer on the economy.

One of these measures was the Streamlined Installment Agreement Lien Withdrawal.  This allows taxpayers in a sub-$25k debt Installment Agreement to meet certain provisions, establish certain period of compliance, and receive a withdrawal of their lien as a reward.

The withdrawal of lien is a nice reward, too.  A release of lien, following full payment of a debt or even a granted Offer in Compromise, leaves a stain on credit, telling the world you don’t have a tax problem any more….

The lien withdrawal, on the other hand, erases the history of the lien, telling the world nothing at all – like the lien never happened.

After an initial period of adjustment, where we all learned how to calculate the Streamlined Installment Agreement payments, how to establish the direct debit structure, how to know when to bring the withdrawal petition, the lien withdrawals in these cases became nearly automatic.  From 2011-2017 our firm must have done several every month without a single issue I can even remember.

Then, earlier this year, we hit a stretch of several cases whose lien withdrawal petitions were denied!   The bases for the denials was varying from cryptic to nonsensical.  We were thrown, unsure what was going on.  We filed appeals, we battled, but it was very, very frustrating.

The root of the problem seemed to be in some language within the manual that spoke of “defaults in payment”.  If you set up one of these Streamlined agreements and you miss a payment, you don’t get a lien withdrawal.  Pretty simple concept, yes?  Paraphrasing a bit, the provision tells the lien unit decision-makers to grant the petition for lien withdrawal as long as the conditions are met and there have been no “defaults in payment”.  That language doesn’t seem terribly vague:  don’t grant the lien withdrawal if the taxpayer blew a payment on the agreement that qualifies them for the withdrawal.  It’s almost so obvious it’s a little strange they even wrote it.

But, one problem you run into all over the IRS is the application of essentially legal concepts by administrative personnel who haven’t had legal training.   You frequently experience decision making that is grounded in their experience with a fact pattern.  You get decision-makers who are accustomed to saying what they say most often, sometimes stretching logic to just do what they do without much ability to explain why.  When you confront one of these decision-makers with the logic or the outcome of their illogical, unprincipled decision, you might get “word salad”, or maybe a version of “I don’t make the rules”, or even just a shrug.  Maddening.

So, that’s what we were getting here – lien unit decision-makers denying run-of-the-mill lien withdrawal petitions for exotic reasons.  When I appealed one of these, the Appeals officer pretty freely granted that the decision by the lien unit was wrong, but then was stretching logic and common sense trying to sustain their decision.   She tried to use this “default in payment” language to say that my client’s technical default of a prior agreement due to an additional assessment caused by someone else’s mistake (she was reported to have credit card processing income she didn’t have) was a basis for denying this lien withdrawal, even though the lien unit didn’t even mention it.  I busted her when she read the provision to me and said only “default” instead of “default in payment”.  She was mad at me for shaming her sloppy efforts to read the manual to me, when she clearly hadn’t read these provisions before in her career and was bending the provisions to suit her inclinations right before my eyes.

Again, she was trying to sustain a decision even though she admitted it was wrong, instead finding a new way to deny my lien withdrawal by changing the words of the manual and grabbing an unrelated technical default from a prior agreement to say it was a “default in payment” of the current agreement.  I was stammering.

The Appeals manager served me a trough of word salad and sustained her sustain.

Now, we have continued to see lien withdrawal petitions granted since then and we’re still fighting those that were denied.  I wouldn’t hesitate to bring a petition if you qualify.  It did change my estimation of whether an SIA-LWD is still a DIY-category task, however.  It’s now in the category of things you could do yourself, but IRS may make it “interesting” in ways that an experienced practitioner would handle better than the layperson might. Another in a long list of practices at the IRS that will keep sending us clients for years.