Tax News

CCH (cch.taxgroup.com) reports:

  Citing "difficult times for the U.S. economy," IRS Commissioner Douglas H. Shulman has announced his commitment of IRS resources to an expedited process under which distressed homeowners can have federal tax liens subordinated or discharged. Although procedures already have been in place for lien subordination (in case of a refinancing) and discharge (in case of a sale) well before the current economic turmoil, the Commissioner's message to the media at IRS headquarters in Washington on December 16 covered three apparent changes:

  --An effort will be made to make more homeowners aware of this relief and facilitate applications;

  --The IRS will be shifting funds, personnel and other resources into expediting the process, thereby shortening the time it takes to obtain lien discharges and subordinations; and

  --By inference, the IRS will likely be more inclined to grant relief due to the current nationwide economic threat caused by foreclosures.

  "We don't want the IRS to be a barrier to people saving or selling their homes," Shulman stated, aware that a federal tax lien often blocks refinancing of mortgages or the sale of a home. To that end, Shulman promised that the IRS will work to speed requests for discharge or subordination of a tax lien so that liens would be lifted faster than the approximately 30 days it now takes after an application has been received.

  The IRS will consider the subordination of a tax lien to a secondary position when the mortgage lender is offering refinancing or a workout. The Service will also consider issuing a certificate of discharge of the lien to enable the short sale or other sale of a residence where proceeds would not cover both the mortgage and the lien.

  Procedures already in place cover the application process. The application process for a certificate of lien subordination may be found in IRS Publication 784, How to Prepare Application for Certificate of Subordination of Federal Tax Lien. Directions for applying for a tax lien discharge are contained in IRS Publication 783, Instructions on how to apply for Certificate of Discharge of Property from Federal Tax Lien. IR-2008-141, which accompanied Shulman's announcement, stressed that "taxpayers' representatives" also may apply for the subordination or discharge and that in the case of a subordination, the taxpayer's lender may assist in the application.

  Shulman concluded, but without elaboration, that the IRS's expedited lien process represents the first in a number of steps that the IRS will be taking over the next several months to assist taxpayers. He particularly stressed that the agency wants to make certain that taxpayers with a long history of compliance don't become noncompliant because of "these extraordinary times." He added that the IRS's mission of service to these taxpayers will be considered as much as its mission of enforcement.

  By George Jones, CCH News Staff

IR-2008-141,
2009FED ¶46,204

Other References:

 
Code Sec. 6323

  CCH Reference - 2008FED ¶38,160.825

 
Code Sec. 7425

  CCH Reference - 2008FED ¶41,708.26

  Tax Research Consultant

  CCH Reference - TRC IRS: 48,166
CCH Reference -
TRC IRS: 51,308