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. But you can avoid it through tax lien discharge.
What is Tax Lien Discharge?
When and Why Should I Apply for a Tax Lien Discharge?
You should apply 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 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, 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?
If the IRS approves your application, they will send you a certificate 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.
This 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.
If you are looking to refinance or sell property placed under a federal tax lien, you may check if your property is eligible to be discharged of tax lien. There are a number of factors to be considered when selling or refinancing property under a tax lien and a applying to be discharged of a tax lien 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.