Wednesday, September 30, 2015

How to apply for a temporary discharge of a federal IRS tax lien so you can close your Sacramento short sale....

While short sales are definitely a much smaller part of the Sacramento real estate market now than they were a few years ago, I am still doing plenty of them. And something that seems to be pretty common, that is seldom discussed, is the fact that many of the folks facing financial hardship also have unpaid income taxes. The IRS may place a Federal Tax Lien on you and your property if you have unpaid income taxes. This can be an issue if you need to sell a home because those liens need to either be paid in full or released before a sale can close. Luckily, there is a process to temporarily discharge tax liens so that a home can be sold.

The IRS wants quite a bit of documentation, packaged up in a certain way, and it can't be submitted until several other milestones in the short sale process have been reached.

I have done this for several of my transactions and it is definitely within my area of expertise. There is not a separate fee for my services to do this, and it is a part of services when I negotiate short sales for my seller clients.

The sellers will need to complete and sign IRS Form 14135 (Application for Certificate of Discharge of Property for Federal Tax Lien), and IRS Form 8821 (Tax Information Authorization) which provides permission for a real estate agent to talk to the IRS on the seller's behalf. Form 14135 outlines in detail the supporting documentation that needs to be sent in with the application. The list of items includes a description of the property, a copy of the deed for the home, a formal appraisal of the home, county valuation of the home, a copy of the formal tax lien as filed with the county, a purchase contract to sell the property, preliminary title report, short sale approvals, an estimated closing statement, and other supporting information as necessary.

An experienced real estate agent will be able to gather all of these documents and assemble the package for submission. If you are selling a home I would not suggest trying to complete this process yourself. It can be complicated. Even just filling out the forms correctly can be a daunting task if you haven't done it before.

When it is time to submit documents to the IRS, you will need to FedEx everything to them at once. For northern California properties, you will need to send everything to the IRS offices in Oakland. In the photo above, all of those documents amounted to about 160 pages, not including the real estate transaction or the short sale negotiation itself. You will need to track the package and find out who the file is ultimately assigned to. Then...follow up! This is not a difficult process but there are several nuances involved. I have closed several of these transactions. If you have questions or are in this situation, I welcome your call.

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