If the IRS has a lien on a piece of property you own, whether it be your house, business, or a real estate investment, you are not allowed to refinance the property until you pay off the amount of the tax lien. Once the tax lien is in place, the IRS takes first position when it comes to any financial dealings. As the official lien holder, the IRS effectively announces to your other creditors and potential creditors that the federal government now owns first rights to all your property and its approximate value. With a federal tax lien on your home, you cannot sell, refinance, or purchase a new house or property until the IRS removes the tax lien.
What if by refinancing your property, however, you will gain access to the financial resources needed to lower your interest rate or pay off part of the IRS tax lien? Will the IRS allow you to refinance under these conditions? If you have Peter Stephan and the Tax Resolution Institute on your side, we can show you how to convince the IRS to subordinate their position on your property to a new lender. Such a key step forward will allow you to gain access to the needed financial resources to resolve your tax crisis.
In order to apply for the subordination of an IRS tax lien on your property, you must follow the extensive directions presented in IRS Publication 784 to the letter. If your paperwork is not in order, the IRS cannot even consider the request. Upon a proper application with the correct documentation, the IRS may still reject your request if the Revenue Officer determines value may exist to the government to deny the application or that the transaction is not legitimate. With extensive experience and expertise in filing such documentation with the IRS, Peter Stephan and the Tax Resolution Institute can place your request in such a position that it has the greatest chance to be accepted.
In the current challenging economic climate, the ability to subordinate an IRS tax lien on your property has become essential. Instead of going up 10-20% per year, California real estate has sunk an average of 41% since peaking in 2007. It is understandable that you are reaching out to lenders for help, but an existing IRS lien will cause a significant problem if you are attempting to restructure a loan, refinance or sell. By its very design, an IRS lien freezes you from taking any financial actions in relation to your property without “dealing” with them first.
On December 16th, 2008, the IRS announced a new policy on processing Federal Tax Lien (FTL) subordination in light of the economic climate and to aid distressed homeowners. “We don’t want the IRS to be a barrier to people saving or selling their homes,” said Doug Shulman, IRS Commissioner. Despite such reassurance, currently in the United States, over 1 million Federal Tax Liens are outstanding and more than 600,000 are filed annually.
A tax lien is a public document and is normally filed after multiple attempts have been made by the IRS to secure payment of the tax debt. If there is a tax lien against your private property and this describes your current economic situation, you may be able to subordinate the tax lien so you can get a loan that will help you reduce your interest rate or pay part or all of your delinquent IRS tax bill. When the IRS agrees to subordinate their first position, then a mortgage lender can move to the top of the list and will be more likely to refinance your home or your property, providing you with the financial resources you need.
If you have a tax lien, it is possible to lift that lien with the purpose of making a payment toward your tax liability. The subordination provides you freedom from a Catch-22 situation: The IRS wants to get paid but their tax lien is making it impossible for you to withdraw equity through refinancing. Here is an example of this process in action with the Tax Resolution Institute by your side:
You have a tax bill of $110,000 with equity in your home of $60,000. Your bank tells you that they will loan you $60,000 if the IRS agrees to allow them to remain as a higher priority creditor. You hire Peter Stephan and the Tax Resolution Institute to prepare an Application for a Certificate of Subordination of Federal Tax Lien. The IRS receives the request and agrees to subordinate the tax lien by issuing the certificate. The bank receives the Certificate of Subordination, completes the financing and you apply some or all of the refinancing proceeds to your delinquent tax bill. If you only want to refinance your property to obtain a lower interest rate (without paying the IRS a penny), the same methodology can be employed.
Afterwards, Peter Stephan and the Tax Experts at the Tax Resolution Institute can negotiate an Offer in Compromise or an Installment Agreement with the IRS for the remaining Federal tax liability. Once the tax resolution program is in place, the tax lien is lifted and your financial outlook can begin heading in the right direction once again. By making a deal that works for both you and the IRS, Peter Stephan creates a win-win situation that allows your tax nightmare to finally end.
About Peter Y. Stephan
Peter Y. Stephan, executive director of the Tax Resolution Institute, has been helping people resolve large, complex payroll tax problems and personal income tax problems for over 25 years. Peter has written a book "The Ultimate Tax Resolution Guide" and speaks on Tax Resolution topics frequently.