Tax Liens Take Second Place to Other Liens
In the past, when you have a tax lien placed on your home in order for the IRS to try to get you pay what you owe, it is difficult to refinance or sell your home. This is because a tax lien means that the IRS has first claim to the money. Mortgage lenders who already lent the money would lose out by refinancing or authorizing a mortgage on a home with a tax lien, since any money that remained would go to the IRS — not the mortgage lender. So, even if you find a buyer, you may not be able to sell your house with a tax lien.
Now, though, with the economy and housing market in so much trouble, the IRS is relaxing its stance, allowing mortgage loans to take precedence of tax liens in some cases. Financial USA points this out about the process of tax liens, and the new program:
Typically, when a homeowner owes past-due taxes, the IRS will file a Notice of Federal Tax Lien on his property, informing other creditors that the IRS has a legal claim. That claim then has to be repaid when the property is sold or refinanced-which can be problematic if the homeowner owes more in mortgage debt than the property is worth.
The new program will ease this burden by allowing certain tax liens to take a secondary position to mortgage-related liens. In some cases, the tax liens may even be discharged. When announcing the program, IRS Commissioner Doug Shulman indicated that he didn’t want his agency to inhibit distressed homeowners from taking steps to improve their finances.
Of course, it is important to realize that just because the tax liens are no longer pre-eminent, the tax liability remains. If you owe taxes, the IRS is still going to want to collect. You can find more information on requesting a certificate of lien subordination in Publication 784, found on the IRS Web site.
