Sam Brotman, JD, LLM, MBA October 19, 2013 6 min read

IRS Tax Lien Release - Part Three - Release and Subordination

Continued from IRS Tax Lien Release - Part Two - Lien Withdrawal

Tax Lien Release and Partial Release of Lien

Second to getting the IRS to withdraw the lien entirely, you want to make sure that you get a tax lien release from the IRS. A tax lien release will still appear on a taxpayer’s credit, but the lien will be shown as paid and not have as adverse an effect. In addition, the IRS will no longer have a claim against your real or personal property. As with withdrawals, absent good cause, the IRS generally will not agree to a tax lien release. However, if you are trying to sell an asset to pay your tax liability, the IRS may grant lien release or a partial release of lien. A partial tax lien release will only apply to a certain piece of property, but it can be useful to help prevent the encumbrance of an asset. One common example of where a partial release of lien is helpful is when the taxpayer is short-selling their residence in order to free up financial flexibility. The IRS considers partial lien release requests on a case-by-case basis and they can be arduous, so be prepared to submit detailed documentation when requesting a partial release of lien.

Alternative to Tax Lien Release: Lien Subordination

Finally, it the IRS will not agree to tax lien withdrawal or tax lien release entirely, a lien subordination is a third option for dealing with an IRS lien. Subordinations are granted usually when a taxpayer is trying to borrow against an asset (while still retaining possession) in order to pay the IRS part of their balance due. Subordinations move the IRS’s creditor priority lower than that of another creditor, such as a bank. Usually, this will be a condition for a lender to agree to lend money on an asset that a federal tax lien has already been placed on. This is because should anything happen to that asset, the IRS would retain creditor priority over the bank. However, because the IRS retains an interest in the property, they may be more likely to agree to subordination than an all out release of lien in certain circumstances. This is fact dependent, however, and depends on the taxpayer’s circumstances. Applications for lien subordinations are made through IRS Form 14134.[1]

Conclusion

In conclusion, IRS tax liens are problematic for taxpayers and are best dealt with sooner rather than later. That said, if a lien has been placed on your property there are a number of options for resolving the issue. Obviously getting the lien withdrawn is the most preferable of these options (only second to avoid a tax lien in the first place), but if not there are other options including lien release and lien subordination. The IRS has been known to be fairly aggressive when it comes to liens and in granting lien releases, so it is best to speak with a qualified tax professional if you are having trouble accomplishing what you need to. As always, I am available for help if you need me via the contact information on this website.

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[1] IRS Form 14134 can be found here: http://www.irs.gov/pub/irs-pdf/f14134.pdf

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

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