Selling Your Home Without Satisfying an IRS Tax Lien
By: Alison Gadoua, Tax Controversy Specialist
If you owe money to the Internal Revenue Service (“IRS”) then it is very likely that they will file a Notice of Federal Tax Lien (“NFTL”) against you to secure the debt. The NFTL provides the government the right to collect the net proceeds in any sale of property that you own in the county in which a lien has been filed. The fastest way to have the lien released is to pay your debt in full. But, what if you can’t afford to pay the debt in full? What if you are looking to sell your home but the sale will not produce any funds for the IRS to entice them to release their lien? Is all hope lost? NO!
The IRS provides an avenue to sell your home without paying off your IRS debt through a lien discharge. A lien discharge means that the IRS will remove the lien from a specific property so that the new owner can have the property transferred to them free of the lien. This request is made through Form 14135, which requires you to provide supporting documentation proving that there is no leftover equity (after payment of mortgages and debt having priority over the IRS, as well as closing costs) for the IRS. Due to the nature of real estate sales, the IRS works through these cases quickly. Our experience is that they turn the cases around within 30 days of our providing a complete package.
So, why would the IRS agree to anything if there is nothing in it for them? Well, they have to! Internal Revenue Code Section 6325(b)(2)(B) provides that a discharge can be issued when it is determined that the government’s interest in the property has no value. If the IRS approves your application, they will send you a discharge certificate. If the IRS denies your request or you disagree with the IRS valuation in a commitment letter, you can speak to a manager or request an appeal.
If you have any questions or need assistance resolving an IRS or state tax issue, please contact our Tax Controversy team by email to firstname.lastname@example.org or call or text to 732-274-1600.