IRS lien in short sale - Posted by cliff

Posted by Carmen_FL on September 18, 2004 at 17:40:30:

The IRS is difficult to deal with, but not impossible. The way I got one off a house was by sheer persistence. We received a Discharge of Federal Tax Lien for the specific property. I called the local IRS office to speed it up after filing it (it can take a long time otherwise!); let them know the exact situation; let them know about the short sale. They realized they weren’t going to get much out of the house. I sent them pictures, estimates for repair, etc.

In the end, they released the property from the IRS lien, without giving up their rights to collect from the sellers.

It does take a long time, though. I had to get the short-selling bank to push back the foreclosure twice. I explained to them about the IRS lien, and they were willing to do it.

Try to find the local IRS office number; or call the same office where she worked out the payment plan.

By the way, have you tried getting the short-sale bank to take enough less to pay off that lien? They may, if you tell them about the IRS lien. I believe the IRS lien is superior (don’t remember off-hand); if that’s the case, then the bank would have to pay them off anyway.

The text below comes straight from the IRS website, by the way, so it looks like you do have some options, like the Discharge, but more than likely it will be easier to ask for a Withdrawal of the lien since she entered into a payment plan. The issue now is time!,,id=108339,00.html#release

Applying for a Discharge of a Federal Tax Lien
If you are giving up ownership of property, such as when you sell your home, you may apply for a Certificate of Discharge. Each application for a discharge of a tax lien releases the effects of the lien against one piece of property. Note that when certain conditions exist, a third party may also request a Certificate of Discharge. If you’re selling your primary residence, you may apply for a taxpayer relocation expense allowance. Certain conditions and limitations apply. Refer to Publication 783, Instructions on How to Apply for a Certificate of Discharge of Property from the Federal Tax Lien.

Making the IRS Lien Secondary to Another Lien

In some cases, a federal tax lien can be made secondary to another lien. That process is called subordination. Refer to Publication 784, How to Prepare Application for Certificate of Subordination of Federal Tax Lien.

Withdrawing Liens

By law, a filed notice of tax lien can be withdrawn if:

The notice was filed too soon or not according to IRS procedures,
You entered into an installment agreement to pay the debt on the notice of lien (unless the agreement provides otherwise),
Withdrawal will speed collecting the tax, or
Withdrawal would be in your best interest (as determined by the Taxpayer Advocate), and in the best interest of the government.

We will give you a copy of the withdrawal, and if you write to us, we will send a copy to other institutions you name.

Hope it helps!

IRS lien in short sale - Posted by cliff

Posted by cliff on September 15, 2004 at 15:03:00:

I am working on my first short sale and here is the situation. First mortgage of $165,000 and an IRS lien of $30,000. The house is trashed and probably not worth more than $150,000 on the open market. The ladie’s income is Social Security and is paying $75 a month toward the IRS. She had her income garnished on a couple of occassions because of non-payment toward the debt so she will pay the $75 a month to avoid that again. The bank is scheduled to take the house in less than 2 months.

I have faxed the auth form to the IRS and have no response. They’re not good about returning phone calls. The way I see it they have 3 options:
1)Release the house and continue collecting $75 a month.
2)Buy the house for $200,000 and lose money-a lot of money.
3)Accept a lesser payoff of approx $5000.

Anyone that has encountered a similar situation if you could share your experience and advice I would greatly appreciate it.