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How to Sell Your Home with a Federal Tax Lien

Many people think that once the IRS files a Federal Tax Lien against you, it is impossible to sell your home.  A lot of people are even told this by their mortgage brokers or real estate agents because they just don’t know how the process works.  Selling your home with a Federal Tax Lien can be done, if you know the correct procedure.

When the IRS files a Federal Tax Lien, it attaches to any equity in your property behind your mortgage holders.  By requesting a Certificate of Discharge from the IRS, you can have the IRS release your home from the lien as long as they are paid the amount that represents their interest. 

So if you have $50,000 of equity in your home, but a $40,000 tax lien you will only actually get paid $10,000 of equity when you sell your home.  As long as the IRS gets paid $40,000 at the closing, they will release the home from the lien.

Whether you have enough equity in your home to pay the entire tax lien or not, the IRS will release the home from the lien if they are paid their proper amount at the closing.  Let’s say your home is fully mortgaged – you have no equity, but you desperately need to sell it.  And again, there is a $40,000 tax lien on the home.  By requesting a Certificate of Discharge, the IRS would release the lien on the home without having to pay them anything as long as you can prove it is a legitimate transaction for fair market value, and that the house is fully mortgaged to the point that the IRS lien has no real value.

It is important to note that the IRS is not releasing the Federal Tax Lien altogether.  They are releasing a specific asset, your home, from the tax lien so that it can be sold and transferred with clean title.

Colonial Tax Consultants can assist you in requesting a Certificate of Discharge.  

Call us today at (866) 573-3755!

Colonial Tax Consultants also welcomes partnerships with real estate agents and mortgage brokers to become their one stop source for helping their clients with tax liens.


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