This past year, there have been several homeowners that have been unable to sell their home or refinance it because of a Federal tax lien blocking the process. Therefore, the IRS has recently announced a new process that will help financially distressed homeowners avoid a federal tax lien.
Taxpayers who want to sell their home or refinance it, and find a federal tax lien on it, now have options. Taxpayers or your mortgage lender can now request the IRS to make a tax lien secondary to the lien held by the lending institution. This is restructuring a loan. Taxpayers can also request the IRS to discharge any claims if the home is being sold for less than the amount of the mortgage lien. This process usually takes 30 days after submission, but the IRS is willing to speed things up for these requests in wake of the poor economy.
The formal process of filling a Notice of Federal Tax Lien enables the government to make legal claim on the property as payment or security of tax debt. This will serve as a public notice to creditors and ensures they get their money first.
Some homeowners can make their federal tax lien secondary to other liens. The IRS will have to determine that taking a secondary position will help with collection of the debt. This process is called subordination.
To apply for a certificate of lien subordination, you will have to follow the directions in Publication 784, which can be found on the IRS website. There is no form on their website for lien subordination, so you will have to type a letter requesting the documentation. Requests can be mailed to anyone of 40 Collection Advisory Groups nationwide. Those addresses can be found in Publication 4235 on the IRS website.
To apply for a tax lien discharge, follow the direction in Publication 783 on the IRS website. Complete instructions can be found in each publication.
As always never wait until the last minute to start the paper work if you have a Federal Tax Lien on your property, this will only make the process longer.
IRS - http://www.irs.gov