Tax Lien Subordination

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 Subordination?

Tax Lien Subordination does not remove a federal tax lien on a property however, it gives a creditor the opportunity to move ahead of the IRS, meaning that that creditor has prioritized interest to your assets, ahead of the IRS. This makes it easier to receive a loan, mortgage or refinance a house.

When and Why Should I Apply for Tax Lien Subordination?

You should apply for Tax Lien Subordination if you are hoping to refinance your home, apply for a loan or hoping 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.

Typically, in the situation of a tax lien, the IRS has first priority to your assets thus it is difficult to receive any form of credit as creditors are low on the list of those with access to your assets, making you an undesirable constituent. When you are approved for a Certificate of Subordination it makes it easier to receive credit as the creditor becomes a top priority for your assets. Visit our IRS tax resolution services page for more info.

How Can I Become Eligible for Tax Lien Subordination?

In order to be eligible for Tax Lien Subordination you must prove that you have a basis for subordination. You must provide the IRS with proof that giving up their property (the lien against your property) would allow you to repay your debt.

According to the IRS, these are basis for subordination:

You can pay an amount equal to the lien or interest to which the certificate supports the 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 make you better able to pay off your tax debt.

Next Steps:

If you have a tax lien on your property and would like to apply for refinancing, a mortgage or a loan Tax Lien Subordination may be a good option for you but, it is not the only option. There are many options you can explore to relieve yourself and your property of tax debt, all with different requirements. It is best to speak with 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 if Tax Lien Subordination is best for you.