I have a situation where I am short-selling a home for a divorcing couple. Divorce decree is final. Husband is living elsewhere and divorce decree makes him solely responsible for a $148,000 IRS tax bill. Unfortunately, the IRS has already put a tax lien in place on the property. Husband signed a Quit Claim deed to property and no longer lives there. Attorney advises the tax lien will remain - it attaches to property, not to the person who owes the bill. Sellers owe $258,000 to lender. Highest list price I can responsibly put it on market for is $250,000 - based on neighborhood comps and condition of home (some delayed maintenance issues - $10,000). Obviously, there will be very little money left for the IRS even with a full price offer. I have never negotiated an IRS tax lien - I need guidance. First steps? Tips? Thank you in advance for any help you can offer!
It has always been my experience with the IRS that they will review for a lien release but require quite a bit of documentation in order to review. The process is usually around 30 days and the clock starts after short sale approval is received. You should be able to look up IRS form 783 which will be needed. Along with this form, you will need to provide purchase contract, listing agreement, short sale approval(s), MLS listing sheet, buyer's pre-approval or proof of funds, and a CMA or appraisal.
The office who will review varies on where the property is located. Your best bet would be to contact the closest field office and they should be able to point you in the right direction. For our properties in New England, we use the Boston field office and they have a dedicated fax and phone to submit these applications. From there, we get a status after about 15 days.
Hoping this helps. Good luck!
If the IRS's position you can generally get it released for $0 as a partial lien release. You need all lien holder approvals, IRS forms, title report, listing agreement, offer to purchase, settlement statement, generally appraisal or BPO to submit the application for review.
Feel free to reach out if you would like support.
Refer to IRS Publication 783 - Certificate of Discharge From Federal Tax Lien - and IRS Publication 4235 for a list of addresses for Collection Advisory Groups.
Documents required to evaluation a federal tax lien for discharge:
IRS Form 14135
Either IRS Form 8821 or Form 2848 (Per the Jacksonville Fl. Advisory Group, Form 2848 is for attorneys only)
BPO or Certified Appraisal
All Recorded Mortgages
All Recorded Encumbrances: Liens, HOA, etc.
Short Sale Approval Letter(s)
Any Number of Tax Liens on the same property can be processed with one set of paperwork.