Significance

• The IRS has a number of collection methods used to secure the taxes owed. The most serious collection action is a levy, which is a legal seizure of a taxpayer's assets to cover the tax owed. A lien, although less severe, can be issued if a taxpayer owes money to the IRS. The IRS allows taxpayers who owe back taxes and cannot pay the tax in full to set up a payment plan whereby the tax is repaid in monthly installments.
  
  

Considerations

• Although the IRS will not levy a taxpayer's assets while an installment agreement is in place, it may still issue a lien to ensure that the balance is paid. Although it is good to have installment agreement, the IRS has no way to ensure that you will continue to make payments and, thus, a lien is often used as a tool for enforcement. It is insurance for the IRS. As such, the IRS may allow the lien on your home even after you've made payment arrangements. The IRS does take into consideration the amount you owe and your history of compliance before issuing a lien.
  
  

Remedies

• If you need your lien removed so you can apply for a line of credit, refinance or sell your home or property, then the IRS has a remedy that may work for you. Most lenders will not extend credit where there is an IRS lien present because an IRS lien is primary and thus places their lien secondary, which jeopardizes the likelihood that they will receive full payment. A Certificate of Subordination places the IRS lien secondary behind that of another creditor.
  
  To request a Certificate of Subordination, you can write a letter to the IRS requesting that they issue a Certificate of Subordination on the property where the lien exists. Unfortunately, there is no standard form used to request a subordination. In your letter to the IRS, you should include a description and location of the property onto which the lien is attached; a copy of the lien; the reason for your request, such as a mortgage to pay off the tax; the name of your attorney; a deed; the name and address of the new mortgage holder, if applicable; the fair market value of the property; a daytime phone number; and a written declaration that the information that you are presenting is true to the best of your knowledge.
  
  

Warning

• In most instances, a lien is not released until after the amount due is paid in full or the statute of limitations for collection has expired, which is 10 years. Furthermore, the lien could appear on your credit report and damage your credit rating.