Given the economic market and condition of today’s real estate market, more individuals are having to turn to the IRS tool of Discharging the Federal Tax Lien. Form 783
A discharge of the Federal Tax Lien means making the IRS Tax Lien secondary to another lien or removing the federal tax lien from a piece of property because there is no equity in the property.
There are two good examples of when the Discharge could take place.
Examples of this could be:
1.IRS has place a Federal Tax Lien on your home and you have built up some equity in the property. You may want to submit an Offer in Compromise and you need the equity out of your home to make the Offer. You can apply for the discharge of the Federal Tax Lien. What actually take place is that the IRS re- records their position . In effect, the IRS it letting someone else take their place in line as a note or mortgage holder.
2. You need to sell your home. There is a federal tax lien filed. Before it clears title the Federal Tax Lien needs to be removed. By filing out the IRS form 783, if accepted by the IRS, the Federal Lien will keeps it place but your property will be removed from the lien. Keep in mind IRS is not fully releasing the federal tax lien, they are simply releasing a specific piece of property from the lien.
Applying for a Discharge of a Federal Tax Lien
If you are giving up ownership of a piece of property, such as when you sell your homestead, you may request IRS for a Certificate of Discharge of the Federal Tax Lien. Each application for a discharge of the federal tax lien releases the effects of the lien against one piece of property.
A third party may also request a Certificate of Discharge of the Federal Tax Lien. If you’re selling your primary residence, you may apply for a taxpayer relocation expense allowance. Certain conditions and limitations apply. Refer to Publication 783, Instructions on How to Apply for a Certificate of Discharge of Property from the Federal Tax Lien