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The simple answer would be yes, but it is not an ordinary real estate deal. When the IRS files a Notice of Federal Tax Lien, the government attaches interest in your property, and as such, it clouds the title. Since the majority of buyers and lenders need an unproven title to help finalize a transaction, an unaddressed lien could become a legal impasse.

Nevertheless, the IRS is not on a mission to ensure you do not sell your house, but they want the cash. With the right compliance with certain federal procedures, you will be able to broker a sale despite a large tax debt.

A federal tax lien is a notice that warns creditors that the government has a legal right to your property. When registered, it accompanies all your wealth, even your primary home.

The lien will show when you list your home in the form of a title search. Without this, even the title company will decline to issue the title insurance, and the lender of the given buyer will probably decline the mortgage as well.

In trying to move, you need to apply one of the approved approaches by the IRS to fulfill or dissolve the lien on said property.

One can be a successful closeout of a sale in the presence of a tax lien, and there are three main paths available:

This is the easiest way to go in case you have a good portion of equity in your house to offset your mortgage, closing cost and the entire amount of tax owed.

• The Process: You demand a payoff letter from the IRS Centralized Lien Operation.
• The Outcome: At the point of settlement, the agent is going to remit the amount of funds to the IRS. The IRS clears your name and the property within 30 days after payment of money, which results in the granting of a Certificate of Release of Federal Tax Lien.

What happens when the value of your home falls short of your tax obligations? You can apply for a Certificate of Discharge. This eliminates the security interest in the particular property that is sold so that the buyer can get a clear title, despite the fact that the debt has not been entirely paid off.

• Conditions: This may be conceded by the IRS in the event of a sale at fair market value and receipt of the so-called net proceeds (the amount remaining after mortgage and routine closing expenses are paid).
• Form: The price will require you to complete IRS Form 14135 at least 45 days before the time of closure.

Although subordination is more typically an option when taking out a refinance, in this case, the new creditor (such as a lender) can leapfrog the IRS in the priority queue. It does not eliminate the lien, but it can facilitate easier transactions to be completed in the event that it ultimately aids the IRS in an accelerated recovery of cash.

The process of selling a home with a lien is very risky. Any mistake in Form 14135 or lateness in demanding a payoff letter may result in a deal falling through.

• Tax Attorneys: They can opt to negotiate with the IRS Advisory Group to allow the calculation of the net proceeds to be equitable.
• Title Companies: Have to work directly with the IRS to make sure the payment is performed correctly through escrow.
• Hint: Do not make a silent sale. A lien that the buyer or title company is concealing will create an impression of fraud and is bound to be detected during the period of conducting a required title search.

Although an IRS tax claim can be quite challenging in terms of selling a home, it is a solvable problem. You can offer the buyer a clear title by proactively seeking a Certificate of Discharge or by a payoff in escrow, and utilize the equity in your home to considerably reduce or even pay off all your taxes.

An application to receive a Certificate of Discharge (Form 14135) normally takes the IRS between 30 and 45 days. Since this is a paper exercise that needs the IRS Advisory Group manager to review, your paperwork should be submitted in time once you have signed a sales contract.

It usually takes time to process the application when it lacks necessary documentation, including a professional appraisal or a draft settlement statement (HUD-1). You can even hire a tax professional to help get your submission process-ready so that you do not lose your buyer.

The IRS has a right to the net proceed of the sale to the extent of the amount that you owe in tax. But they are usually aware of the fact that some senior encumbrances have preeminence. As an illustration, a purchase-money mortgage (your original home loan) will always be virtually paid off before the IRS lien. Also, the IRS typically permits reasonable close up costs to be claimed off the purchase prices, like Realtor commissions, title fees, and transfer taxes, prior to the fact that they receive their fee.

This is referred to as bearing no equity as regards the interest of the government. Even in such instances, it is possible to sell the house with an assertion that the interest the IRS has in the house is worth zero. Section 6325(b)(2) of the IRC provides that in instances where the value of the home falls short of the description of senior liens (such as your mortgage), the IRS can issue a discharge. This will make the sale a go, but you will still have to pay the outstanding amount of taxes, which will still hang on to your other assets.