Selling your home without satisfying an IRS tax lien
By Alison Gadoua, Prager Metis International LLC
If you owe money to the Internal Revenue Service (“IRS”) then it is very likely that it will file a Notice of Federal Tax Lien (“NFTL”) against you to secure the debt. The NFTL provides the US government the right to collect the net proceeds of 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 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 to claim. Due to the nature of real estate sales, the IRS works through these cases quickly. Our experience is that the IRS turns cases around within 30 days of our providing a complete package.
So why would the decision makers at the IRS agree to this process 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, it will send you a discharge certificate. If the IRS denies your request or if you disagree with the IRS valuation in a commitment letter, you can speak to a manager or request an appeal.
Alison GadouaGGI member firm
Prager Metis International LLC
Advisory, Auditing & Accounting, Corporate Finance, Fiduciary & Estate Planning, Tax
More than 17 offices throughout the USA
T: +1 212 643 0099
Prager Metis International LLC is a top accounting firm providing a full range of accounting, audit, tax, and advisory services to domestic and international clientele in a wide range of industries. With 17 offices worldwide, they have a level of expertise and a unique global presence that makes their clients’ world worth more.
Alison Gadoua, Tax Controversy Specialist, has over 20 years of experience in resolving IRS and state tax controversy issues and assisting clients in maintaining business and individual tax compliance. Alison loves traveling, boating, and spending time with her family.
Published: Litigation & Dispute Resolution Newsletter, No. 15, Autumn 2021 l Photo: daniilvolkov - stock.adobe.com