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IRS Speeds Tax
Lien Relief for Homeowners Trying to
Refinance or Sell
IRS Newswire IR-2008-141
WASHINGTON, December 16,
2008 — 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.
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