If the IRS filed a tax bond against your property because of unpaid taxes and there is no way you can remove it, it does not mean that you cannot sell or refinance your home. In fact, the IRS is often interested in improving taxpayers’ financial position, which, in turn, increases their ability to pay off government debt. If refinancing a property would increase your disposable monthly income or allow you to pay a lump sum to the IRS, you may be eligible for tax lien subordination.
If the IRS accepts your applications and issues a Certificate of Federal Tax Lien Subordination, this document allows a potential creditor, whose name appears on your application, to advance ahead of the IRS in the creditor position, but only for the named property in the Certificate of Subordination of Federal Tax Lien.
There are two reasons the IRS might agree to subordinate a bond. These reasons are included in the IRS Code in Sections 6325 (d) (1) and 6325 (d) (2). Lien subordination under Section 6325 (d) (1) is granted if refinancing a taxpayer’s property will provide the taxpayer with funds to pay the tax debt in full, or at least to make a payment equal to the principal that is obtained. IRS interest and penalties add up very quickly, so it is often beneficial for a taxpayer to use this method to decrease tax debt.
Another basis for tax lien subordination may be whether refinancing a property would lower a taxpayer’s monthly mortgage payments and therefore increase disposable income, which can be used to make larger monthly payments to the IRS for the tax liability. . Section 6325 (d) (2) authorizes the subordination of the tax lien for this particular reason.
The IRS requires the completion of Form 14134 – Application for Certificate of Subordination of Federal Tax Lien for this purpose. Typically, it takes 45 days or more for the IRS to process the lien subordination request and review it for the IRS Advisory Group Manager.
If the IRS grants a lien subordination, you may need to send a payment before the IRS sends you the Certificate of Subordination. However, if your request to subordinate a link is based on IRS Code Section and 6325 (d) (2), you do not have to make a payment to obtain your certificate.
If the IRS denies your request to subordinate a lien, you can appeal this decision, but you must ensure that your Collection Appeal Request is received by the deadline stated in the IRS letter.
Although it is possible to file Form 14134 yourself, hiring a tax resolution specialist to submit this form and, if necessary, negotiating a lien subordination on your behalf will save you a lot of time and give you a better chance of success.