Tax Lien Discharge

What is a Tax Lien?

A tax lien is the government’s way of protecting their interest in the case that you do not pay your tax debt. A tax lien attaches to all of your property. If you ignore your tax lien and do not resolve your tax debt, the IRS has the ability to place a levy on your property and seize/ sell it.

What is Tax Lien Discharge?

A Tax Lien Discharge removes your tax lien from a specific property. If you request a tax lien discharge and the IRS accepts your request, they will give you a Certificate of Discharge. A Certificate of Discharge allows you to refinance or sell the property named on your application.
House & Lot
Tax Time

When and Why Should I Apply for a Tax Lien Discharge?

You should apply for a Tax Lien Discharge if you wish to refinance or sell your property after there has been a federal tax lien placed on it. Although it is still possible to sell or refinance the property without a certificate of discharge, the property would remain attached to the IRS tax lien. The new owner would not be subject to paying the tax debt however, the IRS would still be able to place a levy on the property and seize it. Since most potential buyers would not be open to liability, the presence of a lien on the property would likely turn off any buyers from purchasing the property thus, a Tax Lien Discharge comes in handy when it comes to selling or refinance property under a tax lien. See more IRS problem resolution that we offer.

How Can I apply for a Tax Lien Discharge?

In order to be eligible for a Tax Lien Discharge you must provide the IRS with proof that you are able to protect their interest. There are a number of forms you must fill out displaying the appraised value of the property, a description of the property and a basis for the discharge. There are a number of reasons that the IRS may approve your property for discharge including:

What Happens When the IRS Approves My Application for a Lien Discharge?

Application
If the IRS approves your application for a Tax Lien Discharge on your property, they will send you a certificate of discharge towards that specific property. Once you receive a Certificate of Discharge on your property you can place the property for sale without the attached liability of a tax lien on said property. With a discharge, you can refinance your property and use the extra cash from the refinance towards paying your tax debt or you may sell your property and use the proceeds of the sale towards paying off the debt.
Calculation
A Tax Lien Discharge however, is not a solution to the entirety of your tax debt. You will still owe the tax debt as well as any interest or fees attached to the debt to the IRS, even if your property is approved for the discharge. In addition to still owing the debt, the discharge only applies to the specific property named on the certificate, any other property attached to the lien will remain attached and subject to levy if the tax debt is not paid.

Next Steps:

If you are looking to refinance or sell property placed under a federal tax lien, your property may be eligible for a Tax Lien Discharge. There are a number of factors to be considered when selling or refinancing property under a tax lien and a Tax Lien Discharge is one of many routes that you can take. It is best to speak to a tax professional to explore your options and see which best fits your situation. Give us a call today for a consultation to see if a tax lien discharge will work for you.

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