A federal tax lien is the government’s legal claim against your property when you fail to pay owed taxes. It attaches to your real estate, vehicles, bank accounts, and other assets, restricting your ability to sell or refinance those holdings. Discharging a property from a federal tax lien means the IRS agrees to remove its lien claim from that specific piece of real estate while the overall lien remains on other property. This process clears title problems on the discharged property, allowing transactions like sales or refinancing to proceed smoothly.
To request a discharge of property, you or your tax professional must file IRS Form 14135, “Application for Certificate of Discharge of Property From Federal Tax Lien.” The IRS reviews this request with considerations such as whether you plan to sell or refinance, if the discharge would jeopardize their ability to collect the owed tax, and if sufficient lien collateral remains on other assets.
Discharges are commonly requested when you need to sell or refinance a property burdened by a federal tax lien. For example, if the IRS has placed a lien on your home due to unpaid taxes, a buyer’s lender may refuse financing unless the lien is discharged from that property. After the IRS approves, it issues a certificate of discharge removing the lien from that property, allowing the sale or refinancing to proceed.
Importantly, the discharge does not reduce or forgive your tax debt. The lien continues to attach to other property until the debt is fully settled. You cannot get a discharge automatically; it requires an IRS-approved application with justification.
Eligibility criteria for a property discharge include:
- The property must be sold or refinanced.
- The IRS must be convinced that discharging the lien will not impair their collection efforts.
- Sufficient collateral must remain on other properties.
Common misconceptions include believing that discharge means the tax debt is forgiven or that it automatically removes the lien on other assets. This is not the case. The process can be complex, so consulting with a tax professional or attorney is highly recommended.
Typical timelines for the IRS review can range from weeks to several months, depending on case complexity and IRS workload. During this period, keep documentation like correspondence and submitted forms well organized.
Here is a summary table highlighting key points about discharging property from a federal tax lien:
| Topic | Details |
|---|---|
| Purpose | Remove IRS lien from a specific property |
| Payment of Debt? | No, lien remains on other assets |
| How to Request | File Form 14135 with the IRS |
| Common Uses | Selling or refinancing property |
| Effect on Other Assets | Lien continues until debt resolution |
| IRS Approval Criteria | Impact on government’s collection ability |
| Processing Time | Several weeks to months |
For those facing federal tax liens, understanding the discharge process is essential to manage property transactions effectively. For detailed instructions and to download necessary forms, visit the official IRS page on Request to Discharge Property from a Federal Tax Lien (Form 14135).
FAQs:
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Can I get a discharge if I haven’t paid any back taxes? The IRS may grant a discharge if it does not impede their ability to collect owed taxes, often used when selling or refinancing is necessary.
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Does discharge remove the lien from my credit report? No, discharge only removes the lien from the specific property, not from credit reports or other assets.
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How long does the process take? Usually a few weeks to several months depending on the IRS workload.
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Can discharges be requested for multiple properties? Yes, but each property requires a separate IRS approval.
Consulting a tax professional can help navigate this process and avoid common pitfalls. Learn more about federal tax liens and related terms by exploring our glossary at FinHelp.io.