The Internal Revenue Service has instituted a new policy to make it faster for a home owner to remove a lien against their property. With the current economy forcing many homeowners to sell or refinance, a tax lien can delay the process, adding to that property owner's pressure, even blocking a sale or refinance. In the past it has taken 30 days to process a lien removal request which is unacceptable in these difficult times. Doug Shulman, IRS Commission, said, "We don't want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these liens options and to speed our decision-making process so people can refinance their mortgages or sell their homes."
An IRS tax lien can be filed by the Internal Revenue Service when a taxpayer fails to pay all they owe. A lien can be filed against that individual's personal property, including any real estate owned, to recover the amount due. In a typical year, the IRS files more than 600,000 liens, effectively letting other creditors know about their claim. Before any property can be sold or refinanced, that lien must be removed or moved into a secondary position, know as subordination.
If you're one of those taxpayers who has a lien on a home you now want to sell, you must remove the lien so the title can be transferred to the new owner. This can be done by paying off the lien or, under certain circumstances, by having the IRS discharge the debt. A discharge releases the home so it can be sold or refinanced but doesn't release you from the debt. If you're buying another property, the IRS may place a lien against that home or against other personal property you own.
Lien discharges are becoming more common as housing values tumble. The National Association of Realtors (NAR) reported the median home price in November was down 13.2% from a year ago. Director of Federal Tax Programs for NAR, Linda Goold, applauds the effort by the IRS to help with tax liens. "Anything that clears any impediment to a transaction is a boon," she said. "We view that as a great positive."
What Can Orlando Homeowners Do About Tax Liens?
What can you do if you're refinancing or restructuring your loan? You or your lender can ask the IRS Collection Advisory Group to place the tax lien in a secondary or subordinate position. This option is readily available from the IRS though few taxpayers know it exists. Publication 784, "How to Prepare an Application for a Certificate of Subordination of A Federal Tax Lien," explains the letter and documentation you need to send to the IRS.
What can you do if you're selling your home? If the sales price is less than the mortgage amount owed the lender, you can send an application to the IRS to request they discharge the debt and release the home. Find instructions for requesting the discharge in Publication 783, "How to Apply for a Certificate of Discharge of A Federal Tax Lien."
The IRS advises homeowners to notify their lenders early so they are aware of the existing tax lien. The Collection Advisory Group should also be contacted promptly so they can begin work on the homeowner's tax lien request and reduce delays. You can find Collection Advisory Group addresses in Publication 4235.
Check out the tax lien announcement on the IRS website for links to all three publications.
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