IRS To Stop Dragging Its Feet On Subordination, Discharge Requests Involving Homeowner Federal Tax Liens In Attempt To Speed Up Loan Mods, Short Sales

From an Information Release issued by the Internal Revenue Service:

• The Internal Revenue Service [this week] announced an expedited process that will make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing [or modification] of mortgages or the sale of a home.

• If taxpayers are looking to refinance [or restructure an existing mortgage] or sell a home and there is a federal tax lien filed, there are options. Taxpayers or their representatives [...] may request that the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan [known as subordination]. Taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien [ie. short sales] under certain circumstances.(1)

• The process to request a discharge or a subordination of a tax lien takes approximately 30 days after the submission of the completed application, but the IRS will work to speed those requests in wake of the economic downturn.

For the rest of the information release, see IR-2008-141, IRS Speeds Lien Relief for Homeowners Trying to Refinance, Sell, Dec. 16, 2008; or go here to listen to audio file - Tax Lien Relief.

(1) To apply for a certificate of lien subordination, people must follow directions in Publication 784, How to Prepare an Application for a Certificate of Subordination of a Federal Tax Lien. There is no form but there must be a typed letter of request and certain documentation.

To apply for a tax lien discharge, applicants must follow directions in Publication 783, Instructions on How to Apply for a Certificate of Discharge of a Federal Tax Lien. There is no form but there must be a typed letter of request and certain documentation.

Requests should be mailed to one of 40 Collection Advisory Groups nationwide. See Publication 4235 for address information.