Does an Offer in Compromise Remove an IRS Tax Lien?

When you submit an Offer in Compromise, any existing federal tax lien stays in place throughout the entire process. Here's the complete timeline:

**Stage 1: OIC Review (6-12 months)** The lien remains active while the IRS evaluates your offer. You cannot get it removed during this time.

**Stage 2: OIC Acceptance + Payment Period (up to 24 months)** If accepted, you must complete your payment terms: - Lump Sum: Pay full amount within 5 months of acceptance - Periodic Payment: Pay over 6-24 months The lien remains throughout this period.

**Stage 3: 5-Year Compliance Period** After completing payments, you must remain in compliance for 5 years: - File all required returns on time - Pay all taxes when due - No new tax debt The lien remains during this entire period.

**Stage 4: Lien Release** Only after completing payments AND the 5-year compliance period does the IRS release the lien. Release happens within 30 days of meeting all requirements.

**Total time with lien:** Potentially 6-7+ years from OIC submission.

**Lien Release vs. Withdrawal After OIC:** - Release: The lien is marked as satisfied but remains on your credit history - Withdrawal: You may request withdrawal (Form 12277) after lien release if you're in full compliance—this removes it from your credit record entirely

**What if you default on OIC terms?** If you fail to comply during the 5-year period (miss a payment, don't file a return, incur new tax debt), the OIC is defaulted. The original tax debt is reinstated minus any payments made, and the lien remains in full force.