What is a 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.

What is best use of a lien subordination?

While lien discharge is best used for the sale or transfer of a property and in refinancing it, lien subordination works in the case of refinance but not necessarily when selling your property, since it just allows others to put a lien on the same property, and to take the first priority, moving ahead of the IRS. Creditors, specifically secured loans or creditors, would want to place a lien when funding you and therefore, a lien subordination or discharge will be absolutely necessary when you want to refinance a property.

How to qualify for lien subordination?

ou will have to apply for a certificate of subordination by following the instructions and completing the right forms. The IRS also has some self-help videos on several topics, including self-help for tax subordination. You will have to make a case that the lien subordination will be to the advantage of the IRS. for example, if refinancing will improve your financial situation to allow you to make payments towards your debt, or increase the amount of your current payment or if you will receive cash from the refinance that will allow you to pay part or all of the outstanding debt amount. Because there specifics unique to every situation, please contact us to discuss your case.

What is Trust Fund Penalty?

A Trust Fund in terms of employment tax should not be mistaken with a trust fund in terms of wealth management. This is the payroll tax amount assessed to the officers of the business. Tax resolution can help reduce and or arrange the payment of these taxes.

What is a Trust Fund Recovery Penalty (TRFP)?

A Trust Fund Recovery Penalty can be assessed if the unpaid trust fund taxes cannot be immediately collected from the business. This often happens if the business falls on hard times and taps into that fund for any reason. According International Revenue Code 6672(a) an individual can be held liable for penalty for willful failure to collect, account for, or pay to the IRS the taxes for the business.

Who is Held Responsible for the TRFP?

According to the IRS, the TRFP can be assessed against any person who is: responsible for collecting or paying withheld employment taxes, willfully fails to collect or pay the taxes.

Tax Lien Subordination

What is a Tax Lien Subordination?

Tax lien subordination places a creditor ahead of the IRS in their claims against a property. This may be necessary for real estate transactions, such as a mortgage refinance. Tax Lien Subordination does not remove a federal tax lien on a property; however, a creditor is given prioritized interest to your assets, ahead of the IRS. This makes it easier to acquire a loan or mortgage or to refinance a house.

What is Tax Lien?

A tax lien affects your financial assets, personal property and your real estate property. Tax liens can vary based upon your individual situation. They are the government’s way of protecting their interest in case you fail to pay your tax debt in a timely manner. If you ignore your tax lien and do not resolve your tax debt, the IRS can place a levy on your property and seize and sell it to satisfy your tax debt.

When and Why Should I Apply for Tax Lien Subordination?

You should apply for Tax Lien Subordination if you:

hope to refinance your home,
wish to apply for a loan,
hope to be approved for a mortgage.

It is best practice to apply for tax lien subordination at least a few months before you start to apply for a loan, mortgage or refinancing.

The IRS usually has first priority to your assets regarding a tax lien. Therefore, it is difficult to receive any form of credit since creditors are ranked low on the list of those with access to your assets, thereby making you an undesirable constituent. When you are approved for a Certificate of Subordination, it becomes easier to receive credit since the creditor becomes a top contender for your assets. Visit our IRS tax resolution services page for more information on this topic.

How Can I Become Eligible for Tax Lien Subordination?

Eligibility for Tax Lien Subordination is demonstrated by you providing proof to the IRS that giving up their claim to your property through a federal tax lien is more advantageous to them since it would allow you to pay your tax debt.

According to the IRS, the following are basis for tax lien subordination:

You can pay an amount equal to the lien or interest to which the certificate subordinates the federal tax lien
If the issuance of the certificate will increase the amount the government realizes and make collection of the tax liability easier. This might involve a refinance to a lower interest rate which would, if the subordination were granted, allow a larger monthly repayment rate on the tax liability.

Essentially, you must demonstrate that receiving a Certificate of Subordination would improve your financial situation and improve your ability pay off your tax debt to the IRS.

Next Steps:

Applying for a Tax Lien Subordination may be your best option if you have a tax lien on your property and would like to apply for refinancing, a mortgage or a loan. However, this may not the only option. There are many options you can explore to relieve yourself and your property of tax debt, all with different requirements and benefits. It is best to consult a tax professional to help you review your financial situation and which option best fits your situation. Just give us a call today to discuss whether or not a Tax Lien Subordination is the best option for you.