The IRS “What Ifs” for Struggling Taxpayers – Tax Related (C-4)


What if there is a federal tax lien on my home?


If there is a federal tax lien on your home, you must satisfy the lien before you can sell or
refinance your home. There are a number of options to satisfy the tax lien. Normally, if
you have equity in your property, the tax lien is paid (in part or in whole depending on
the equity) out of the sales proceeds at the time of closing. If the home is being sold for
less than the lien amount, the taxpayer can request the IRS discharge the lien to allow for
the completion of the sale. Taxpayers or lenders also can ask that a federal tax lien be
made secondary to the lending institution’s lien to allow for the refinancing or
restructuring of a mortgage. The IRS currently is working to speed requests for discharge
or mortgage restructuring to assist taxpayers during this economic downturn.


To assist struggling taxpayers, the IRS plans to significantly increase the dollar
thresholds when liens are generally filed. The new dollar amount is in keeping with
inflationary changes since the number was last revised. Currently, liens are automatically
filed at certain dollar levels for people with past-due balances. The IRS plans to review
the results and impact of the lien threshold change in about a year.


Also, the IRS is making other fundamental changes to liens in cases where taxpayers
enter into a Direct Debit Installment Agreement (DDIA).


Additionally, the IRS will modify procedures that will make it easier for taxpayers to
obtain lien withdrawals. Liens will now be withdrawn once full payment of taxes is made
if the taxpayer requests it.


For more information, see  IR-2011-20 , IRS Announces New Effort to Help Struggling
Taxpayers Get a Fresh Start; Major Changes Made to Lien Process;  IR-2008-141 , IRS
Speeds Lien Relief for Homeowners Trying to Refinance, Sell; and  Understanding a
Federal Tax Lien .
(IRS Web Site Updated 11/02/21) (TTT 08/23/22)