Getting relief from an IRS tax lien: a brief look at tax lien subordination
In previous posts, we’ve looked at several avenues of relief available to taxpayers dealing with an IRS tax lien. As we noted before, the best way of addressing a tax lien is to pay the underlying debt so that the IRS releases the lien. Taxpayers who dispute the tax bill should, of course, address any errors through the appeals process before paying the bill.
Another potential avenue of relief from a tax lien, aside from the various grounds for discharge of property from the lien, is subordination. Although subordination does not remove the lien, it does allow the taxpayer’s creditors to take priority over the IRS, which can give the taxpayer a better chance of obtaining a mortgage or other type of loan.
There are certain requirements a taxpayer must met in order to be eligible for subordination. One possible basis for subordination is when the taxpayer pays the IRS an amount equal to the lien or interest the IRS gives priority over its own lien. The tax lien would remain on the property, but it would be subordinate to the taxpayer’s new loan.
Another basis on which subordination can be granted is when subordination of the tax lien would make it easier for the IRS to collect the bill. This could occur in situations where the taxpayer refinances a mortgage loan to obtain a lower interest rate or when a business owner could increase his or her profit by subordinating the tax lien.
Making a strong case for subordination for subordination of a tax lien is not necessarily easy, but working with an experienced tax attorney who has a sound grasp of the law can certainly help a taxpayer’s case.
In our next post, we’ll continue looking at options for tax lien relief, particularly the topic of withdrawal of tax liens.