Taxpayer’s coming into our Richardson, TX tax office with IRS Debt, often have to deal with Tax Liens. As you’ve learned over the past few weeks, the Notice of Federal Tax Lien (NFTL) is a powerful tool of the IRS and having an NFTL filed can wreak havoc over your finances and your life. While in most cases, the IRS will not be willing to subordinate its position to another lender, there are times when this can be accomplished.
Why the IRS might agree to Subordinate its position?
Typically, this will be related to a mortgage loan and what a Subordination means is the IRS agrees to be 2nd in line behind another lender. When the IRS files an NFTL, the IRS does not jump the line on any mortgage lender that already has a lien on the property. However, if any other lender lends money on the property, they get in back of the IRS. Because of this, lenders are almost never going to lend money to the homeowner without the IRS agreeing to subordinate its position.
The IRS will only agree to subordinate its position if it is in the best interest of the IRS and government. Here are some examples:
- There is a cash out refinance and the cash taken out will be used to pay down the IRS debt.
- A refinance at a lower rate with a smaller payment, which in turn, will allow the taxpayer to increase their installment payments to the IRS.
- A family member agrees to make a payment to the IRS on behalf of the taxpayer with the NFTL but requires that they have a security interest above the IRS for the amount of their loan.
Generally, if the IRS can improve their position by subordinating their interest, they’re willing to do so.
What is the Process for a Subordination of the Federal Tax Lien?
The Taxpayer will apply for the Certificate of Subordination of a Federal Tax Lien with IRS Form 14134. The IRS will require documentation that supports your request and to establish why doing so is in the best interest of the government. You should start this process as early as possible since it can take up to 60 days to get the approval of the IRS.
Do You Need Help?
If you need help with a the Subordination of an NFTL or any other IRS Collection issue, I’d be happy to talk with you. Please give me a call at (972) 821-1991 or email me at bob@jablonskyandassociates.
