Too sell a home with an IRS tax lien, you should remove the tax lien before closing the deal.
Q: I am an enrolled agent with 20 years of practice, and 30 years working for the IRS. I thoroughly enjoyed your recent article dealing with IRS liens. I had a few thoughts to add.
A federal tax lien is generally self-cancelling after the tolling of the statutory period, which is usually 10 years from the date of assessment.
If the statutory period for collection is extended, by offer in compromise, waiver etc., the IRS has 30 days after the normal date of cancellation to refile a lien to protect the government’s interest and maintain its priority to assets.
Where the lien has to be filed, which depends on state law, changes the effect of the lien. An example of this would be in a state requiring filing in the county where the property is located. A lien filed there would not affect property in the next county. A filing in the superior court of the taxpayer’s state would affect property anywhere within that state.
In cases where the delinquent taxpayer does not have sufficient equity in their property to satisfy the lien, the IRS can, after investigation, issue a specific discharge for the lien on that property. This will allow the property to be released from the effect of the original lien, but still maintain the government’s priority.
A: Thanks for adding to our knowledge of IRS liens. We’re sure you’ve seen more than your fair share in your 50 years of working experience.
We also wanted to expand a bit on your reply to say that a tax lien in one state may work differently than in another state. If you are trying to sell property with an IRS tax lien, you should know how that lien affects the title to your home well in advance of trying to sell the home.
If you are selling your home in a short sale, you will want to work with IRS in obtaining the necessary documentation from them at the same time you are working with your lender to get the short sale approved. If you don’t work with the IRS and lender together, you can find yourself in the unfortunate position of having your lender approve the short sale but being unable to close due to a failure to have the necessary documents from the IRS to get the home sold.
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