Premium Tax Resolutions, Inc.

Tax liens are one of the most frequent issues we run across in dealing with the IRS and the State.  The IRS routinely files tax liens on debts over $10,000, so most of our clients have at least one tax lien in place.  Since these liens are routinely filed, be wary of any company or tax professional claiming to have some sort of "special program" for dealing with liens.  If they will lie to you about the existence of special lien programs, they will lie about other things including fees and what relief is available.  Tax liens can interfere with a lot of things, including selling a house or buying a car, and they can ruin your credt score.  Fortunately, there are programs available to allow taxpayers to alleviate these impacts.  Check out the information below for what programs may be available.

The ABCs of A Tax Lien

Tax liens are filed by the State or the IRS to protect the rights the taxing authorities may in any property owned by the tax debtor.  These liens are authorized by various federal, state, and local statutes depending on where the money is owed.  In some instances, as with the IRS, the liens automatically expire after the statutory collection period ends.  In others, the liens may never expire or may be refiled to make them essentially last forever.  So if you have a tax lien, what are some options you may have to get rid of it?  Here are some of the commonly-available options that might be available for you to either rid yourself of the lien completely or allow you to mitigate the effects.

Certificate of Subordination - The usual rule of liens is that the first lien properly perfected is superior to a lien perfected at a later time.  This means that if an asset is liquidated, then the first lien filed will be paid off first, then the next, and so on until either all lienholders a paid or there is no money left and the remaining liens are extinguished.  A subordination occurs when a prior lienholder agrees to stand in line behind a new lienholder.  A very common situation where this comes up in relation to tax liens is a mortgage refinance.  The refinancing bank would normally be second in line behind the existing tax lien, and as such they would not give you a loan unless the lien is fully satisfied.  That is fine in theory, but there might not be enough equity to satisfy the tax lien, or there might not be any equity at all and the loan is done simply to take advantage of a lower interest rate and ensure a lower monthly payment.  The IRS and many other authorities will grant these subordinations if you can demonstrate that it is in their best interests.  Commonly, this is done by showing that the lower refinanced payment will enable the borrower to make payments to satisfy the tax debt.  It can also be shown by using what equity there is in the property to pay the tax debt down in part.  This is different than other options because the tax debtor retains ownership of the property and the lien remains on the property, just in a lower position than it would otherwise have been.

Certificate of Discharge - Once a tax lien is filed against a debtor or a piece of property, the lien will typically follow that property around unless the lien is paid.  The reason for this is that the liens are public record, and when purchasing property it is presumed that the buyer will conduct a search of the public records to ensure the person selling the property actually owns it.  In a real estate context, this is accomplished in the form of a title report.  If the buyer does not either ensure the lien is paid off or otherwise satisfied, they take the property subject to the existing lien.  Obviously, most buyers don't want this, so the lien can essentially make selling property impossible, even in cases where the proceeds from the sale would be going to pay down the tax debt.  In situations where property subject to a lien is being sold, a certificate of discharge should be obtained by the buyer if the lien is not sompletely satisfied as part of the closing conditions.  Te taxing authorities reguarly grant these discharges, but once again they will insist that the discharge is in their best interest.  This can be accomplished either by having any net proceeds go to the taxing authority, by showing that the lien had no value because the seller has no euqity, by showing that sellign the property will enable the seller to start repaying on their debts, or by a combination of the three.  The key distinction between a discharge and a subordination is that, after a discharge the debtor no longer owns the property AND the lien is no longer attached to the property discharged.  The lien will typically still remain attached to the seller's other property.

Lien Release - A Release is arguably the best lien resolution available.  After a Release, the taxpayer no longer has a tax lien.  Releases are usually only available after the debt is discharged, but there may be certain times where, either by statute or local rule, the lien may be released prior to it being fully paid.  Releases can be full or partial, and they may be available even if the underlying tax debt is valid if the IRS or State did not follow the criteria for the lien to be valid, for example by failing to provide the taxpayer notice of the debt.  A Release is different from either a discharge or subordination because after a Release there is no lien.  Be very cautiousin dealing with anyone promising to get liens released.  The truth is that the releases are seldom granted and only in very limited circumstances, but many unscrupulous companies make this a main selling point even though it is extremely unlikely they can deliver on their promises.

Lien Withdrawal -  A lien withdrawal removes the public Notice of Tax Lien.  Most often, this is used to enable someone to get the liens removed from their credit report.  The IRS will grant a withdrawal in a few instances even where the debt still exists, but it does not relieve the taxpayer from their debt.  For most purposes, this functions similarly to a release, since without the public notice purchasers of property and lenders may not be aware of the tax debt.

The IRS processes lien requests through the Centralized Lien Operation, which can be reached by calling (800) 913-6050.