Media Relations Office Washington, D.C. Media Contact: 202.622.4000
www.irs.gov/newsroom Public Contact: 800.829.1040
IRS Speeds Lien Relief for Homeowners Trying to Refinance, Sell
IR-2008-141, Dec. 16, 2008
WASHINGTON — The Internal Revenue Service today announced an expedited
process that will make it easier for financially distressed homeowners to avoid having a
federal tax lien block refinancing of mortgages or the sale of a home.
If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed,
there are options. Taxpayers or their representatives, such as their lenders, may
request that the IRS make a tax lien secondary to the lien by the lending institution that
is refinancing or restructuring a loan. Taxpayers or their representatives may request
that the IRS discharge its claim if the home is being sold for less than the amount of the
mortgage lien under certain circumstances.
The process to request a discharge or a subordination of a tax lien takes approximately
30 days after the submission of the completed application, but the IRS will work to
speed those requests in wake of the economic downturn.
“We don’t want the IRS to be a barrier to people saving or selling their homes. We want
to raise awareness of these lien options and to speed our decision-making process so
people can refinance their mortgages or sell their homes,” said Doug Shulman, IRS
commissioner.
“We realize these are difficult times for many Americans,” Shulman said. “We will
ensure we have the resources in place to resolve these issues quickly and homeowners
can complete their transactions.”
Filing a Notice of Federal Tax Lien is a formal process by which the government makes
a legal claim to property as security or payment for a tax debt. It serves as a public
notice to other creditors that the government has a claim on the property.
In some cases, a federal tax lien can be made secondary to another lien, such as a
lending institution’s, if the IRS determines that taking a secondary position ultimately will
help with collection of the tax debt. That process is called subordination. Taxpayers or
their representatives may apply for a subordination of a federal tax lien if they are
refinancing or restructuring their mortgage. Without lien subordination, taxpayers may
be unable to borrow funds or reduce their payments. Lending institutions generally want
their lien to have priority on the home being used as collateral.
To apply for a certificate of lien subordination, people must follow directions in
Publication 784, How to Prepare an Application for a Certificate of Subordination of a
Federal Tax Lien. Again, there is no form but there must be a typed letter of request and
certain documentation. The request should be mailed to one of 40 Collection Advisory
Groups nationwide. See Publication 4235, Collection Advisory Group Addresses, for
address information.
Taxpayers or their representatives may apply for a certificate of discharge of a tax lien if
they are giving up ownership of the property, such as selling the property, at an amount
less than the mortgage lien if the mortgage lien is senior to the tax lien. The IRS may
also issue a certificate of discharge in other circumstances if the taxpayer has sufficient
equity in other assets, can substitute other assets, or is able to pay the IRS its equity in
the property. Without a tax lien discharge, the taxpayer may be unable to complete the
home ownership change and the ownership title will remain clouded.
To apply for a tax lien discharge, applicants must follow directions in Publication 783,
Instructions on How to Apply for a Certificate of Discharge of a Federal Tax Lien. There
is no form but there must be a typed letter of request and certain documentation. The
request should be mailed to one of 40 Collection Advisory Groups nationwide. See
Publication 4235 for address information.
The IRS also urges people to contact the agency’s Collection Advisory Group early in
the home sale or refinancing process so that it can begin work on their requests. People
sometimes delay informing lenders of the tax liens, which only serves to delay the
transaction.
Currently, there are more than 1 million federal tax liens outstanding tied to both real
and personal property. The IRS issues more than 600,000 federal tax lien notices
annually.
–30–
