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Posted on Jan 29, 2009 in Tax Q&A | 0 comments

Having the IRS Release Tax Lien

QUESTION: I owe the IRS a substantial amount of money, but I do not have any money left over at the end of the month after I pay my bills to be able to afford to pay anything on my taxes.  I could refinance my house since the rates are a lot lower now and save a few hundred dollars per month, but the IRS has a lien.  Can you help me?

ANSWER: Yes, it is possible to work with the IRS to have the lien either released or subordinated beneath the lender’s mortgage so you can refinance your home.  In fact, due to the state of the economy there are some new rules where the IRS is expediting the process of releasing or subordinating liens for taxpayers so they can refinance their homes to take advantage of the low mortgage interest rates.  They are especially excited to be able to subordinate a lien when you will be able to take some money out of the equity in your home to pay your tax debt, but that is not always necessary.

The process of having a tax lien subordinated or released altogether takes a little time and you have to be able to provide very specific information about the new loan.  This information involves providing a good faith estimate, copy of the settlement statement prepared for the loan so the IRS can see what the proposed fees and costs that will be involved, etc.  Most of this information can be provided by your mortgage broker or bank since in many cases you will not have a closing attorney scheduled until a little later on in the process.