In the event the IRS has placed a tax lien on your property, it may be possible to have them subordinate their tax lien in the interest of another lien if it will help facilitate collection of the tax. This basically means the IRS will allow another lien in front of their lien if it will help collect a tax against the taxpayer.
This will only happen if the IRS is sure there will be enough money left over after the first lien is satisfied to collect their tax. The lien that is put in front of the IRS tax lien will be able to collect their debt first and the IRS will be able to collect what is left over from the remaining money.
Certificate of Subordination Situations
Here are a few examples of situations that warrant a certificate of subordination from the IRS:
1. In the case when the IRS is actually paid the amount of the lien that is subordinate to the tax lien.
2. The taxpayer is able to refinance their property at a lower interest rate and theoretically have more money available to pay their IRS tax debt. This can be open to interpretation and therefore needs to be approved by the IRS as realistic.
3. The subordination will increase the amount to be realized by the IRS from the property subject to the lien. This can happen in many situations from needing financing for building repairs to additional financing to complete inventory to bring to market.
In most situations, the taxpayer will need to ask for a subordination of a federal tax lien to continue in business and stop the IRS from pursuing collection against them. This mostly arising when a taxpayer who owns a business obtains financing to continue running their business and does not want the IRS to force them to pay their debt right away.
How to Obtain a Certificate of Subordination
If a taxpayer wishes to apply for a certificate of subordination for a federal tax lien, they can do so by filing Form 14134 (Application for Certificate of Subordination of Federal Tax Lien). To file their form you must mail it to the area office of the IRS where the lien was actually filed. This is usually the county that the property is located in.