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IRS Lien Discharge:What Is It & How Do I Apply?

You may despise taxes, but you can’t deny the benefits they provide to society. If you receive free medical care, unemployment compensation, welfare benefits, or other government benefits, you should know that they are all funded by your taxes. That’s why, if you don’t pay your back taxes, the IRS may become harsh and take serious legal action to ensure that these beneficial programs continue efficiently. They may issue tax liens, informing you that your property will be seized to pay your back taxes.

Luckily, taxpayers have the right to file an appeal for IRS tax lien discharge. If the taxpayer can prove with evidence that due to a valid reason, the taxpayer was unable to pay the tax, then the IRS can grant relief and may not seize the property.

We have discussed in detail what is IRS lien discharge and how you can go for it to save your properties.

What Is an IRS Lien?

IRS tax liens on real estate are a judicial notice or public document from the IRS stating that the American government has the power to seize all of your property when you fail to pay back taxes. When you fail to pay your taxes on time, the IRS will simply evaluate your liability and balance the tax amount with your valuables. They may send a notice to take your valuable assets if you may not have enough cash in your bank accounts to clear your taxes. This notification of seizing property is referred to as an IRS lien. Taxpayers can be affected by IRS liens in the accompanying ways.

  • You may lose your current or future assets, including valuables and retirement funds. 
  • The IRS can cast you in a negative light to investors by showing possible investors that  you owe taxes
  • The IRS lien can also leave you bankrupt and claim your future accounts receivables.

Moreover, you can get rid of the IRS lien and save your property through three legal methods provided by the IRS. These methods include

  1. Discharge Of Property
  2. Subordination Of IRS Lien
  3. Withdrawal Of IRS Federal Tax Lien

Method 1: Discharge Of Property

Certain conditions allow you to discharge your property from the IRS. A discharge of property from the IRS is a document that confirms the IRS has relinquished its power to seize your particular possessions. When the lien is removed from your property, it no longer appears in district office records or title reports. So, when the title is cleared you become eligible to sell the property on your own. 

 However, this remission does not eliminate your taxes. You may benefit from the IRS lien discharge in the following manner.

  • You’ll be able to charge higher prices for your house by selling it on your own and keeping any profit that you make. 
  • You can remortgage your house by demonstrating that the IRS interest rate is lower than the interest rate charged by the mortgage broker.
  • You can acquire a handsome loan by putting your house up as collateral.

The IRS may release a lien on one of your properties while keeping a lien on the others. So, you are not exempted from paying your back taxes when the lien is removed from one of your properties. Removing the lien helps you to get some profit on your property by selling the property or getting a loan against the property which you may use to pay off your back taxes. 

How To Apply IRS Tax Lien Discharge?

To get an IRS tax lien discharge on your property, you need to apply through Form 14135. This form involves your detailed information including 

  • Your details
  • Your representative details
  • Your borrower or finance company details
  • Your property details
  • Financial information, such as the anticipated sale price and revenues to be given to the IRS in return for the Certificate of Discharge

Moreover, you can also attach the IRS lien copy, sales contract agreement, title report, or other additional informative documents. You need to file for discharge within 45 days of selling your property or settling a loan on your property. 

When Do You Become Eligible For IRS Tax Lien Discharge?

To become eligible for a tax lien discharge, you must assure the IRS that you are not going to take back the IRS rights on your property. You are just taking an alternative route to pay your back taxes instead of losing your house. Therefore, you may be qualified for IRS lien discharge if the following conditions are met.

  1. It is possible to have other commodities or substantial assets two or three times higher than your IRS taxes and liens. You can show these properties and earn the trust of the IRS that releasing your house will not release you from paying your back taxes. You have other valuable property to balance your taxes.
  2. If you pay your lien interest amount to the IRS then the lien will be removed from your property. Paying taxes at once may be difficult, but once you make a clearance of liened interest money, your house is free from government custody. Later, you can pay off your back taxes.  
  3. The IRS lien interests are worthless. Underwater mortgages, for instance, can make an asset worthless. Senior lien holders’ interest in a property outweighs the property’s value, so the IRS cannot claim any value. 
  4. You end up selling your property while keeping the funds subject to the IRS tax lien in escrow. You must also provide the escrow contract along with your lien release application. 
  5. You can make arrangements with a third-party owner and convince them to pay your liened amount in cash or bond. The third party must file a response to the IRS within 120 days to confront the lien interest or they may lose the right to deposit the lien amount. 

Method 2: Subordination Of Lien

You can reduce the impact of a lien in other ways besides an IRS Certificate of Discharge. The IRS may become subordinate to other creditors, meaning taxpayers may be able to get a mortgage or loan easier if the claim to the property by the mortgage provider, or loan provider, can be elevated above the IRS claim to the property. Even though a subordination certificate does not remove the tax lien, it allows creditors to shift their position ahead of the IRS concerning the property listed. 

You can therefore borrow money against the property to be used to repay your tax debt. The refinancing process makes it easier for taxpayers to clear any back taxes with the money obtained from the refinance. 

However, it’s just relief in pain, not that pain is removed completely. Your taxes are still there.

How To Avoid Lien?

The only way to avoid liens is to comply with the IRS and pay all of your taxes on time. If you receive notices from the IRS, you should take immediate action and respond to them. 

However, dealing with all of this legal stuff is not as easy as you think. You may faint once if you receive a letter from the IRS about a lien. Therefore, the best thing you can do upon receiving an IRS lien letter is to call a tax consultant. A tax professional can assist you in making your property lien free using their legal knowledge and previous experiences with the IRS

No more tax stress, act today! Call Us to get the help you need.