Under this method the delinquent taxpayer is able to secure financing for the purpose of making a payment towards their federal tax liability. A Federal Tax Lien gives the IRS a secured interest in any property that is subject to the Lien. Because of this secured interest, prospective banks are not willing to loan money to a taxpayer with a Federal Tax Lien unless they can obtain a security interest superior to that of the IRS Lien. By subordinating the Lien, the IRS allows a lender to take a priority interest ahead of any IRS claims on value of the property. In return, the IRS will require that it receive ALL proceeds in excess of sales costs and amounts due to Lien holders who are a priority to the IRS (the bank that holds your loan, etc…), up to the amount of taxes you owe. While there is no specific IRS Form for Subordination or discharge of a Federal Tax Lien, the process is very specific. As long as the IRS is receiving the full proceeds (other than closing costs) from the sale or refinance of a property, the IRS will usually grant a Lien Subordination.

This procedure, though it is quite common, is sometimes difficult to achieve without assistance from a tax professional. The first thing that needs to be done is finding a bank to fund your loan. Ask us if you need a referral to a lender. Once you have your financing application in place, we will need to supply the IRS with required information on your property and the impending loan. Once this information is delivered to the proper department within the IRS, your subordination should be granted. The normal processing time for subordination may be as long as 30 to 60 days. However, when there is danger of losing the loan, the IRS may expedite the certificate at our request.