IRS might make its tax lien second in line to help you refinance or sell a home

The Baltimore Sun

Is the IRS liening on you?

There might be some relief if a tax lien on your house is preventing you from refinancing your mortgage or selling your home.

You or your lender can ask the IRS to make its tax lien secondary to the one by the mortgage company refinancing your loan. Or, you can ask the IRS to discharge its lien if you are selling the house for less than the amount of the mortgage lien, the IRS says.

A mortgage company is loath to refinance a loan if its lien on the house isn't at the top. The IRS says it's willing to make its claim be second in line if this will help the agency ultimately collect the taxes you owe.

Follow the directions in Publication 784 under "How to Prepare an Application for a Certificate of Subordination of a Federal Tax Lien." Publications are available online at or by calling 800-829-3676.

You also might find it difficult to sell a house if you have an outstanding tax lien on the property. But if you are selling it for less than you owe on the mortgage, and the lender's lien comes ahead of the IRS, the government might forgive its claim.

Check out "How to Apply for a Certificate of Discharge of a Federal Tax Lien" in Publication 783.

In both cases, look at Publication 4235 to find out where to mail your requests.

It takes about 30 days to process an application for relief, but the IRS recently said it will try to speed up the requests in light of the tough economy.

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