IRS Giving Homeowners A Break On Tax Liens

Under the new plan by the IRS, taxpayers who are financially challenged can request for any federal tax liens to be made secondary to liens by lending institutions. This could help an existing homeowner to speed up a refinance or restructuring loan.

In addition, taxpayers will be able to request that the IRS discharge or remove any claims to properties where the property is being sold for less than the amount of the current mortgage lien.

"We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today," Shulman said, stressing that "we don't want the IRS to be a barrier to people saving or selling their homes."

IRS Commissioner Shulman says this new program will target people who normally pay their taxes in full but have not been able to meet their tax obligations due to the current economic climate.

The IRS places tax liens on property when the government makes legal claims as security or payment for a tax debt. When this occurs, the government will notify all the other creditors that it has a claim on the property and has priority.

With this action, lenders can now relax, because lending institutions want their lien to be primary when used as collateral. The IRS will now allow a tax lien to become secondary to another lien, if they believe that by doing this will ultimately assist in the collection of the taxes owed. Taxpayers and their representatives can then make application for a “subordination” of their tax lien if they are refinancing their mortgage.

It normally takes up to 30 days for the IRS to rule on discharge requests or subordination of tax liens. However, the IRS is committed to speed up this process so that taxpayers won’t experience any delays in trying to obtain new mortgage loans. Taxpayers should contact the IRS’ Collection Advisory Group soon when purchasing or refinancing a home.

More than 600,000 federal tax liens are issued yearly and that there are more than 1 million outstanding tax liens associated with real and personal property.