How to Sell a Home with an IRS Tax Lien
Selling a House with a Property Tax Lien
If you’re in debt to the IRS, the government can slap a tax lien on your home. A federal tax lien can make it difficult for you to sell your house, refinance the mortgage or get credit until the debt is paid.
A lien also attaches to other assets you may have, including money, vehicles and any other property you own. If you’re a business owner, those assets may be included in the lien as well. And filing for bankruptcy will not clear a federal tax lien. The lien may continue after bankruptcy.
Anyone past due on their federal taxes is subject to a tax lien. The IRS will assess your liability and then file a Notice of Federal Tax Lien, which alerts creditors that the IRS has a legal right to your property. You will receive that notice, too.
A federal tax lien doesn’t mean the IRS has taken over your property. But if you want to sell the home, the IRS has a right to collect the proceeds from the sale to satisfy your tax bill.
Ways to Get Rid of a Tax Lien
1. Pay your bill in full
This is the best way to get rid of a tax lien on your home. The IRS releases the lien within 30 days of the debt being paid.
2. Apply for lien withdrawal
A withdrawal of the lien removes the public Notice of Federal Tax Lien and shows that the IRS is not competing with other creditors for your property. But you are still liable for the debt.
You have to apply for a withdrawal, however, and the IRS determines whether you qualify. You may be required to set up payment installments and have the payments debited directly from your bank account. The IRS may not even consider you for a lien withdrawal unless you owe less than $25,000 and can pay it off in 60 months or less.
Once the lien is withdrawn, you should notify the major credit-reporting bureaus; Experian, TransUnion and Equifax. If the lien is withdrawn and reported as such, the credit bureau deletes it from the file. As a result, it should no longer appear in the credit report.
3. Sell your house
If you have enough equity in your home to satisfy your federal tax bill, you may ask the IRS to “discharge” the lien and use your sales proceeds to pay off the IRS. A discharge removes the lien from the house so that it can transfer to the new owner, free of the lien.
You would need to provide the IRS with complete documentation of the sale. The best move, if you expect the IRS to put a tax lien on your home, is to sell it before the lien is triggered.
If you are looking to sell a property with a tax lien, we can help. We buy property in all 50 states and Washington D.C. for cash--- even ones that still owe back taxes. If you want to sell your house with back property taxes, you may fill out the Sell My Property Fast Form or call us at (202) 826-8179.