What to do with proceeds from sale of property subject to IRS lien?

Apparently the taxpayer owned real estate that was subject to an IRS lien. The taxpayer wanted to sell the property, but needed the IRS to agree to discharge the property from the lien to allow the sale to go through. The taxpayer wanted the proceeds to be applied to a specific tax year.

Can a tax lien be removed when you sell a house?

You are in the process of selling your house, and your bank alerts you that they found an IRS tax lien, and it needs to removed for your buyer. It is not financially feasible for you to pay the IRS lien in full to have it immediately removed. However, you can still successfully clear the title and sell your house.

Can a tax lien be released before a foreclosure?

If the IRS tax lien is prior to the mortgage being foreclosed, the IRS tax lien will not be foreclosed through the judicial sale, will remain a lien on the property and the amount of the lien must be paid in full before the lien will be released.

How to discharge a tax lien from a property?

Discharge means the IRS removes the lien from property so that it may transfer to the new owner free of the lien. Use Form 14135. Subordination means the IRS gives another creditor the right to be paid before the tax lien is paid. Use Form 14134.

Can you sell a house with a federal tax lien?

The federal tax lien has to greater then the amount of equity in the house. If that’s the case you can sell the home by getting a federal tax lien certificate of discharge. As you can imagine getting the certificate of discharge is easier said then done, especially when things move at the “speed of government.”

Can a bank foreclose if there is a federal tax lien?

The first mortgage holder can foreclose on the property and wipe out the IRS lien. The IRS, however, has 120 days to redeem the property, meaning that it can pay the purchase price of the house and pay out the first mortgage to preserve its claim.

Can you get a tax lien on Your House after bankruptcy?

And filing for bankruptcy will not clear a federal tax lien. The lien may continue after bankruptcy. Anyone past due on their federal taxes is subject to a tax lien. The IRS will assess your liability and then file a Notice of Federal Tax Lien, which alerts creditors that the IRS has a legal right to your home. You will receive that notice, too.

How can I get Out of a federal tax lien?

The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property. For more information, refer to Publication 594, The IRS Collection Process PDF . Paying your tax debt – in full – is the best way to get rid of a federal tax lien.