If you owe the IRS money in unpaid taxes, you may soon find yourself facing a federal tax lien on your assets. Finding a solution to this problem is not always easy. In some cases, obtaining a subordination of the lien can be a good compromise. A subordination does not remove the lien. Instead, it allows other creditors to move ahead of the IRS, which can sometimes make it easier for the taxpayer to obtain a loan or a mortgage.
Application Process for Obtaining a Subordination of a Federal Tax Lien
Obtaining a subordination requires that the taxpayer complete an Application for Certificate of Subordination of Federal Tax Lien. This form requests all of the relevant details pertaining to the lien. In addition to basic taxpayer information, the form requires the following:
- The name of the property owner and the relationship to the person completing the application.
- Contact information for the attorney or representative assisting the taxpayer, if applicable.
- Contact information for the lending or finance company.
- The type of transaction that is being proposed, such as a loan consolidation or refinance.
- The amount of the existing loan, if refinancing.
- The amount of the new loan.
- The amount to be paid to the government.
- The basis for granting of the subordination. Your choices are that the government will receive an amount equal to the lien or interest to which the certificate of subordination is issued, or that it will increase the government’s interest and make collection of the tax liability easier.
- An adequate description of the property.
- An appraisal or valuation of the property.
- A copy of the federal tax lien.
- A copy of the proposed loan agreement, if applicable. This should also be accompanied by a description of how the subordination is in the best interests of the government.
- A copy of a current title report or a list of encumbrances with seniority over the federal tax lien.
- A copy of the propose closing statement, also known as a HUD-1.
- Any additional information that the taxpayer believes will have a bearing on the request for the subordination.
- The taxpayer’s signature under a declaration that the application is true, subject to the pains and penalties of perjury.
Facing an IRS tax lien does not have to mean the end of the world. We are here to help you find an acceptable solution. We encourage you to get started by checking out our free guide, The Ultimate Survival Guide for IRS Problems.