Can I Sell My House With an IRS Tax Lien?

When taxes are due and the IRS files a notice of federal tax lien, the lien attaches to all assets of the taxpayer.  While the lien may create certain issues or problems for the taxpayer, the lien does not preclude the taxpayer from selling assets.  This article has been prepared by a tax attorney at McGuire Law Firm in Columbus, OH to provide additional information relating to the sale of assets, specifically real estate when a federal tax lien is attaching to the property. If you have more questions or require assistance, get in touch with a lawyer at the McGuire Law Firm for a free consultation. 

Does an IRS Tax Lien Attach to All of My Assets?

Yes, a federal tax lien is considered a blanket lien and attaches to all assets of the applicable taxpayer and assets acquired after the filing of the lien. 

Can I Sell My House or Real Estate When the IRS Has Filed a Lien and the Lien is Attaching to the Real Estate?

Yes, you can sell the real estate but the proceeds from the sale up and to the current balance on the lien periods will need to be paid to the IRS to pass clean title to the buyer.

If a Tax Lien Has Been Filed and I Sell My House With a Mortgage Due, Does the Mortgage Get Paid?

Generally, yes.  If the bank providing the mortgage has filed their lien prior to the IRS’ filing of a Notice of Federal Tax Lien, the bank would have a priority lien and upon the sale of the real estate, the bank or mortgage holder should be paid prior to the IRS.

What if the Sale Proceeds Will Not Payoff the Tax Lien Amount?

If there is not enough money to “go around” and satisfy the tax lien amount to release the lien, a taxpayer generally needs to request a Certificate of Discharge of Federal Tax Lien.  The discharge of the tax lien does not release the lien but rather releases the lien from a specific asset, which in our case here would be releasing the lien from the real estate.  Thus, the lien is released from the real estate so clean title can be passed to the buyer but the lien still remains and attaches to all other assets of the taxpayer.

What Information is Needed to Request a Certificate of Discharge of Federal Tax Lien

With the sale of real estate, to request a discharge of the lien you will need a copy of the real estate contract for the sale of the real estate, two appraisals (one from a licensed appraiser), complete information for the buyer of the real estate, copies of the tax lien(s), current title report and the proposed settlement statement to show the flow of funds from the sale.

When Should I Submit the Discharge Request?

It would make the most sense to submit the Request for Certificate of Discharge as soon as you have an executed contract for the sale of the real estate to give yourself as much time as possible as it will take a few weeks to a month for the IRS to make a determination.  Thus, you could work on having the appraisals done and be compiling the other documents as you are getting close to executing the real estate contract.

Could the Closing or Sale of the Real Estate Be Delayed if I Do Not Have a Discharge of the Lien?

Yes, without having the IRS agreeing to discharge the lien, it is highly likely the closing would be delayed or possibly not occur.  Without the discharge, the title company would not be able to pass clean title to the buyer and the buyer would be highly unlikely to close if they were not sure the lien on the real estate would be released.

Speak to a Columbus Tax Lawyer Before You Sell

If the IRS has filed a lien against you individually or your business, it is recommended you discuss your tax issues with a tax attorney.  A tax attorney can assist you in resolving the underlying tax liabilities and hopefully advise you in an attempt to prevent future tax issues.  You can speak with a Columbus Tax Attorney by contacting The McGuire Law Firm for a free consultation.