The dreaded tax lien is essentially an official statement telling you that the government has claim to your property until you pay your unpaid tax debts that you owe the Internal Revenue Service. Tax liens dramatically impact your refinancing and buying options more so than any other kind of debt. The odds of your getting refinancing or selling the property when there is a tax lien involved are slim. The IRS would tell you that until you satisfy the lien you will be unable to sell or refinance the property. The filing of a Notice of Federal Tax Lien is the formal notice that the government provides making a legal claim to the property as security or payment for a tax debt. It puts the other creditors on notice that the federal government has a claim on the property.
If you have a tax lien on your property or assets then you should reach out to our team of tax attorneys and tax specialists at McCauley Law Offices, P.C. You can still sell a property with a tax lien, or request refinancing when you have a tax lien on a property, however you must go about the process a bit differently and be strategic in your efforts. We can assist you with each step.
How do you satisfy a tax lien against your property or assets?
There are a few different options to satisfy the tax line. If you have equity in the property, the tax line is paid by using the equity out of the sales proceeds at the time of closing. This can be in part or in whole depending on the equity. If the home is selling for less than the lien amount, we can request on your behalf that the IRS discharge the line to allow for the completion of the sale. You or the lender can also request that the federal tax line be made secondary to the lender’s lien, to allow for refinancing or restructuring of a mortgage. During times of economic downturns and uncertainty, the IRS works to speed these types of request for discharge or mortgage restructuring. Traditionally, your lender, if you still owe on a mortgage of the property, has the priority lien on the property and that priority trumps any priority that the federal tax lien may have.
So, how does federal tax lien priority work?
It would be a very rare situation to find that your lender’s lien does not have priority over the property. Federal law says that mortgages and other secured asset loans have priority lien after fees and property taxes. They hold the most important lien, if you will, and if you do not pay them then they will foreclose on the property for non-payment. If the IRS filed a federal tax lien on the property or asset, then their request to the property would be secondary to your initial mortgage or asset loan.
Refinancing is Difficult
Refinancing a property that has a federal tax lien on it is very difficult. No standard lender is going to take a risk and offer a refinancing agreement without the mortgage being a purchase money mortgage with the types of protections that are in place. The lender would not lend unless the lien was withdrawn, discharged, subordinated, or paid off at closing.
Ways of Having the IRS Lower the Priority on a Tax Lien
We’d be happy to assist you with requesting the the IRS lower the priority on a tax lien. The IRs has a priority to work with financially distressed property owners to avoid having a federal tax lien block refinancing or the sale of a property. We can request that the IRS make a tax lien secondary to the lien from a lender that is restructuring or refinancing the loan for you. We can request that they discharge the claim altogether if the home is being sold for less than the amount of the mortgage lien in certain situations. The process of requesting a discharge or subordination of a tax lien takes about 30 days after the request is submitted.
Subordination of a tax lien makes the governments lien secondary to another lien on the property, such as your lenders. You can apply for a subordination of a federal tax lien, and without one you will be unlikely to borrow funds or refinance in the future. This is the true way to lower the priority on a tax lien.
Discharge of a lien is available you are giving up ownership of the property, selling it, at a amount less than the mortgage lien if the mortgage lien is senior to the tax lien. Sometimes the IRS will also provide a certificate of discharge of the lien if you have sufficient equity in other assets, thus paying the IRS tax debts owed.
At McCauley Law Offices, P.C., our lawyers will find a solution to your tax problems, no matter how complex your IRS issue is. View our services and contact us (or call 610-388-4474) to schedule a free consultation with one of our tax attorneys. View and purchase Gregory McCauley’s published work “TAXJAMS: Simple Solutions” on Amazon. From our office in Chester County, Pennsylvania, we find tax solutions for clients throughout the country.
