Quick overview

An IRS tax lien arises after the IRS issues a Notice and Demand for Payment and the tax remains unpaid. The IRS may file a Notice of Federal Tax Lien (NFTL) in public records to protect the government’s interest in the taxpayer’s property. A recorded lien does not transfer ownership, but it does attach to most property and can block or complicate sales, refinances, and secured loans (IRS — Understanding a Lien: https://www.irs.gov/individuals/understanding-a-lien).

How release, discharge and subordination differ

  • Release (full satisfaction): The IRS files a Certificate of Release when the tax debt is paid or otherwise satisfied; this removes the federal lien from public record. The IRS generally records the release within 30 days after the liability is satisfied (IRS guidance).
  • Discharge (property-specific removal): A Certificate of Discharge removes the lien from one specific asset (for example, to allow a sale of a single parcel) while the lien remains attached to other assets.
  • Subordination (priority change): A Certificate of Subordination lets a new lender take priority over the IRS lien for a particular loan or mortgage, enabling refinancing or a new secured loan without removing the lien entirely.

Understanding the distinction matters: release clears the lien completely, discharge clears it for one property, and subordination preserves the lien but changes the order of creditor claims.

Typical effects on title and transactions

  • Title searches and title insurance: Title companies find recorded NFTs and will usually require a release, discharge, or subordination before closing. A lien creates a cloud on title.
  • Lending and refinancing: Most mortgage lenders will not fund a purchase or refinance unless they are first in priority or the lien is subordinated or released.
  • Credit and public records: While major credit bureaus tightened public-record reporting of liens in recent years, lenders and title companies still rely on county recorder records and the NFTL when assessing risk.

Common ways a lien is resolved

  1. Pay the tax in full — the fastest clear title route; the IRS records the release after payment is processed. (See IRS — Understanding a Lien.)
  2. Enter an installment agreement — may not automatically lead to release; ask the IRS about partial-release, discharge, or subordination options in writing.
  3. Negotiate an Offer in Compromise (OIC) — if accepted and paid, the IRS will issue a release; OICs have specific eligibility rules and documentation (see our guide on the Offer in Compromise process: https://finhelp.io/glossary/offers-in-compromise-eligibility-and-the-application-process/).
  4. Request a discharge for a specific property — commonly used to allow sales; the IRS evaluates the requested discharge’s effect on its ability to collect.
  5. Ask for subordination — lenders often request subordination to permit a refinance; IRS approval depends on whether subordinating increases the government’s ability to be paid.

How to request a discharge or subordination (practical steps)

  1. Get documentation from the lender or title company that explains the requested action (purchase contract, refinance terms, loan application).
  2. Contact the IRS office that issued the NFTL or the local IRS lien unit; many requests must be submitted in writing with supporting documents.
  3. Expect the IRS to weigh collection interests — they may require escrow holdbacks, partial payoffs, or updated appraisals.
  4. Ask for a written certificate (discharge, subordination, or release) and verify it is recorded with the county recorder.
  5. Follow up with your title company and lender to confirm the lien status before closing.

Practical examples from practice

  • Small business owner: Payroll-tax liens blocked refinancing until the business negotiated an installment agreement, provided collateral information, and secured a subordination certificate so a new lender could take first mortgage position.
  • Home sale: A homeowner sold a condo after the IRS issued a discharge for that unit while the federal lien stayed attached to other assets; the buyer’s title insurer issued coverage once the discharge recorded.

Mistakes to avoid

  • Waiting for a sale or refinance to attract lender attention — address notices early to avoid an NFTL filing.
  • Assuming bankruptcy removes the lien — a bankruptcy discharge may eliminate the taxpayer’s personal liability for some taxes, but liens can survive and remain attached to property unless separately released.
  • Relying on credit-report status — even if a lien doesn’t appear on a consumer credit file, it still exists in public records and affects title transfers.

When subordination makes sense

Subordination is appropriate when the refinance or loan increases cash available to pay the IRS (for example, by letting a homeowner borrow against home equity to pay the tax) or when lender cooperation would improve IRS collection prospects. Lenders usually initiate the subordination request; taxpayers should coordinate with their lender and tax representative.

Where to get official help

For additional context on options that can affect lien outcomes (payment plans, Offers in Compromise, Fresh Start alternatives), see our related guides: “How the Fresh Start program affects liens, levies, and installment agreements” (https://finhelp.io/glossary/how-the-fresh-start-program-affects-liens-levies-and-installment-agreements/) and “Offers in Compromise: Eligibility and the Application Process” (https://finhelp.io/glossary/offers-in-compromise-eligibility-and-the-application-process/).

Bottom line

A recorded IRS tax lien doesn’t transfer ownership, but it does make property harder to sell, refinance, or use as collateral. Getting clear title usually requires paying the debt, negotiating a settlement, or obtaining a targeted discharge or subordination from the IRS — each option has different timelines and trade-offs. Start early, collect lender and title company requirements, and get IRS certificates recorded to avoid last-minute delays.

Disclaimer: This entry is educational and not individualized tax advice. For case-specific guidance, consult a tax attorney or a licensed tax professional. Authoritative IRS sources cited above should be consulted for current procedures and forms.