According to the California Association of Realtors, the IRS announced it is planning to provide relief to distressed homeowners who are blocked from refinancing or selling their home by federal tax liens. This relief will help people sell their homes, or refinance without having to pay off these tax liens as a part of that process. Since home equity has greatly diminished over the last few years, many homeowners can no longer afford to pay these liens at the time of sale or refinance. According to the IRS, there are more than one million current federal tax liens against real and personal property.
In the case of a refinance, the homeowner may request that the IRS makes its tax lien "subordinate" (aka, secondary) to the mortgage of the refinancing lender. For a sale, the homeowner may, under certain circumstances, request that the IRS discharge its claim. The IRS's processing time for subordination or discharge requests has been about 30 days. According to CAR, the IRS is currently working to expedite that time frame to help distressed homeowners. For IRS instructions on requesting relief from federal tax liens, go to the IRS Publication 783 for discharges and Publication 784 for subordinations.
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