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Selling A House With A Federal Tax Lien

James Anderson

January 21, 2022

Selling a house with a federal tax lien is possible. The law places a tax lien on a property to secure the payment of taxes, which can apply to both real and personal property with unpaid taxes.

When you don’t pay your taxes, the government has a lien on your property to protect its interest. The property is taken to satisfy the tax obligation by a levy.

The IRS has the authority to take, levy, and auction any real or personal property you own or have an interest in if you fail to pay or make arrangements to do so.

The possibility to sell your home even if the government has seized it remains high. For those who owe taxes, selling their home may be a viable option: Your mortgage lender and the government that has filed a tax lien could be paid if you sell your property for enough money.

To determine how much you owe in back taxes, you’ll first need to know the value of your property. In most cases, if your house or property is worth more than the taxes, and selling it will pay them in full, the sale will be approved.

Continue reading this article to delve deeper into Selling a House With a Federal Tax Lien.

In the case of lien vs. levy

As stated above, a lien is a legitimate claim put on a property. The lien claims ownership but does not take over. Tax liens might come from the federal government, or your bank can arrange a mortgage lien on your property.

A levy is the real seizure of property to pay a debt in full. If your state authorizes levies, it takes your property to pay a tax bill, a court judgment, child support, or alimony.

Selling a House with a Federal Tax Lien: Types of Liens

A House That Is For Sale Despite Encountering A Federal Tax Lien, For Article Selling A House With A Federal Tax Lien

The federal government uses liens to compel income tax payments. However, your mortgage is a lien on your property, and there are times when they can be beneficial.

Having a lien on your home is an effective way for your mortgage lender to secure your property until the loan you took out to buy it is fully repaid.

Key Fact: Lienholders aren’t limited to real estate; in fact, personal property, commercial property, and other assets can all be subject to a lien.

Non-consensual liens can be created by either the lienor or the lienee. A non-consensual lien, like a judgment lien, is imposed without your consent. Your mortgage is an example of a consensual lien.

There is a wide range of liens to consider, and below we will explore each of them.

Liens on Federal (Income) Taxes

When you owe money to the federal government and haven’t paid it, the IRS puts a lien on your property.

It is now permissible for the IRS to seize your property if you don’t pay your taxes. If a company owes unpaid taxes, liens may be put on the individual or business’s assets. If you want to get the lien erased, you’ll have to pay both interest and penalties on the amount you owe.

A lien can be addressed in various ways, including paying off the obligation.

The Internal Revenue Code is what determines a person’s eligibility. When you get a discharge, you can sell your house to obtain money to pay off your debts.

The public notification of the Federal Tax Lien is removed when the lien is withdrawn. Lets the public know you are not competing with other creditors when it comes to the IRS for your assets.

Federal tax liens can be as frightening as the IRS, but various methods can help you to avoid liens.

Liens on property taxes

Property Tax Liens

A property tax lien is a type of lien that you’ve probably already heard about after reading about income taxes.

Real property taxes fund public services like police, fire, and library departments in your municipality and county. Property tax liens are put on your property when a homeowner does pay their dues.

If you don’t pay municipal expenses like your sewer and water bill, you may end up with a lien on your home.

If you owe overdue taxes, you may also have to pay interest and penalties.

Top Tip: You can file for bankruptcy and have your debts discharged. You may also be able to work out a deal with the lien holder to settle your outstanding debts.

Judgment Liens

Judgment lien refers to the fact that a court has issued a judgment against a debtor for failing to pay their creditors. As previously stated, a judgment lien is a non-consensual form of a lien.

As long as you don’t object to this lien, the court will enforce it against the debtor. There is a court ruling after a creditor sues a debtor for repayment.

Another example of a judgment lien is when someone is injured in an accident, and you are sued for damages. If your insurance does not cover the damages, a judgment lien may be placed to ensure that you pay for them.

Taxes can be imposed through wage garnishment, property seizures, or liens on assets.

If a debtor fails to meet a contractual commitment, the creditor can enforce a judgment lien and seize the debtor’s real or personal property.

Individuals and corporations can be held responsible for the repayment of a lien. The creditor has access to assets ranging from the debtor’s business or real property to personal property such as cars, appliances, furniture, and other worthy belongings.

Remember: A lien can only be established on a specific sort of property if the state’s legislation permits it.

Selling a House with a Federal Tax Lien: A Practical Guide

It’s possible to go around the initial terms of a tax lien by disputing it or by negotiating around it.

Acquire and Present a Discharge Certificate

Request a discharge certificate from the IRS to remove a lien on your property. A certificate of clearance will allow you to sell your property and use the proceeds to pay off your debt. However, it will not completely remove your lien.

The certificate of discharge must be shown before the sale can be finalized. Once the monies from the closing have been sent to your creditor, the lien will be formally cleared. You’ll receive a letter from your creditor asserting that the lien has been removed.

Your home should be sold as-is.

Selling your home as-is is the best option, but bear in mind that simple repairs and modifications can increase its value.

Painting your entire house might cost you an additional month’s worth of interest and penalties. Due to fluctuations in the housing market, it may take some time until your home is sold.

Let go of the idea of refinishing your floors for the sake of expediency and sell your home as-is. Get your money fast so that you can get out of debt as soon as possible.

Don’t Pay the Liens You Don’t Have to Pay

Do not wait to register a challenge if you believe that your lien has been filed in error, most usually because it was meant to be filed in someone else’s name.  If you’ve already paid it off, you may still find a lien on your credit report.

Tax professionals can help you plan ahead for this type of situation. In most cases, the IRS will not even consider your complaint unless a tax advisor is present to mediate. If your case necessitates legal aid, consider hiring a tax attorney to handle lien appeals and other legal issues.

Await the End of Your Lien.

Due to the risk of severe penalties, you should avoid attempting to delay the expiration of your lien. The previous paragraph said that liens could be refiled and that creditors usually do not wait for the lien to expire before collecting on it.

When they do, it’s usually because they have a relatively low debt load. If you’re waiting for your lien to expire, remember you’re gambling with the government and your finances. Use alternative methods to reduce the risk of severe repercussions while settling your lien.

Possibly Occurring Problems

To successfully sell your home and pay off your mortgage, you must be aware of the potential hazards that could jeopardize your sale.

Lien Debt Is More Expensive Than the Property.

Unless you have enough equity in your home to settle your tax obligation, you should first pay off enough of it to lessen your lien. Before you file for discharge, make sure to do this. The lien on your house won’t be reduced enough before you can sell it to pay it off.

There are few options left if you can’t pay off your debt with your house. No partial payments can be made with the property because the lien was filed to ensure that you are fully repaid. To avoid bankruptcy, you’ll need to lessen your lien enough to be able to sell your home.

Before filing for bankruptcy, be sure you know your alternatives. You will be unable to sell or auction your property if you file for bankruptcy because of the lien that will remain on it. However, you will be reimbursed for your debts by your creditors.

Finding of Liens

Being Honest About Tax Liens Is Really Important

If you’re ashamed of your tax lien, it’s a bad idea to keep it a secret from the individuals helping you sell your house, whether it’s an attorney or a real estate agent.

A title search will reveal any outstanding tax liens on a property despite your best efforts to conceal outstanding liens. Selling a home with a federal tax lien can be difficult, so be honest with your real estate agent and/or attorney about your financial condition.

As a result, they may focus on lien-specific concerns and give the expertise needed to make the entire process more efficient.

Bear in mind: You can always seek assistance from a tax lien specialist, real estate agent, or lawyer.

Handle Your Tax Lien Right Away!

You don’t want debt to cling to you any longer, so you must make the difficult decision to separate yourself from your home. Financial freedom can be gained or lost by selling your house for cash. Without taking care of your lien now, you risk getting into much more difficulties in the future. Now is the time to go to our homepage and provide us with your residential address.


Is it possible to buy a house if you owe the IRS money?

To put it briefly, “no.” In most cases, a tax lien won’t preclude you from purchasing a home unless the IRS is obliged to be the first lienholder on the property.

Is a federal tax lien subordinate to a mortgage in terms of priority?

A tax lien will still exist on your real and personal property, and you will still be responsible for the total amount of your tax bill (as well as related interest and penalties). Subordinate your tax lien to a mortgage refinance, for example, and then use the money to pay off your tax lien.

What happens ten years after the lien on a federal tax return expires?

Even though the IRS has more than 10 years to collect, the lien will expire after that period unless the IRS timely refiles it. Refiling of the tax lien by the IRS is considered a continuation of the original lien if it is done on time.

Is it a terrible thing to have a tax lien?

Legal action against unpaid taxes is serious business. The lien on your home or property indicates that you have not paid all of your federal or state income taxes. There is no immediate property confiscation with liens, but the next step is levies, which are serious business indeed.

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