I Have to Sell My Home, But I Have a Tax Lien

IRS Taking Your Assets Now. If You Owe Taxes, Read This

How to Keep From Getting Ripped Off

I Want to Sell My Home, But I Have A Tax Lien

Discharge of Property from Federal Tax Lien

OCTOBER 26, 2010 UPDATE

This can be a major problem. Here's the typical scenario. You owe taxes and you have major financial problems. You can't pay your mortgage on time or you simply can't pay it at all so you decide to sell your home. You finally find a buyer and the contract to sell your home is finally agreed upon.

Then, a few days before you're ready to close the transaction, your Realtor calls you. The conversation goes something like this....."Bob, Mary, we have a little problem. The title company found a tax lien against you for $25,000. Can you pay this off? You can't? Then the IRS is going to take every penny you were supposed to get and there's not enough to pay them in full. We can't close this sale and if you can't fix this right away, you're going to lose this buyer. Oh, and by the way, if you blow this sale, you still owe me my sales commission, too!"

Think this doesn't happen in real life? Think again. It happens all too often. When it does occur, there is a way out. It's a little known procedure called, a Certificate of Discharge of Property from Federal Tax Lien and comes under section 6325(b) of the Internal Revenue Code.

And finally, the IRS has done something we've been waiting forever to see. The IRS has created form 14135, Application for Discharge of Federal Tax Lien. Officially, the form is dated June 2010, but I had no idea this form existed until just a few days ago. You'll find the form and the instructions in Publication 783. 

You must submit the application at least 45 days prior to the time that the property will close. I strongly suggest that you hire us to handle this transaction, but if you don't make sure you get everything done correctly, completely and in plenty of time.

In a nutshell, here's what happens. The property is sold free and clear of the tax lien That means that the IRS allows a piece of property to which a lien formerly attached to be sold and that properly no longer has a tax lien attached to it. You will still owe the taxes you owed prior to the sale minor the amount the IRS receives from the sale. The buyer will own the home and the lien will not attach to the property.

Sound complicated? It really isn't that bad. Here's the bottom line. You will need professional assistance to handle this transaction. NO Realtor will deal with it, but without it, they don't get paid. NO title company will deal with it, but without it, they don't get their fees. As the seller, you don't have a clue what to do and you'll be in a panic. The buyer will definitely be in a complete panic and with good reason. BUT, you don't have to see the transaction go down the toilet.

There is a significant amount of paperwork that must be put together. That's why when you finish reading this, you'll call me at 800.714.1880 and say, "Steve, help me right now." If you try to do it on your own or your Realtor tries to do and it gets completely messed up and you are ready to close and the IRS lien is still in place, I'll charge you double or triple to fix it so don't try this on your own. It's not worth it.

Finally, do not wait until the last minute. We generally need 45 days to get these done. Anything less and we'll have to scramble. As soon as you know there isn't enough to pay off the IRS in full, call me right away.

I've handled as many of these over the past 23 years as anyone in the country. Every one is different and some are very, very difficult, but they are usually "do-able".

Here's what you do. Call me. The price will be fair and without doing it correctly, your sale will not go through.

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Last updated 10/29/2012 11:05:48 AM

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