Tax Lien Subordination

If the IRS filed a tax lien against your property due to unpaid taxes, and there is no way you can get it removed, it does not mean you cannot sell or refinance your house. As a matter of fact, the IRS is often interested in improving taxpayer’s financial situation, which, in turn, increases your ability to pay back the debt to the government. If refinancing a property would increase your monthly disposable income, or allow you to pay a lump sum to the IRS, you might be eligible for tax lien subordination.

If the IRS accepts your requests and issues a Certificate of Subordination of Federal Tax Lien, this document permits a potential creditor, whose name was listed on your request, to move ahead of the IRS in the creditor position, but only for the property named on the Certificate of Subordination of Federal Tax Lien.

There are two reasons why the IRS might agree to subordinate a lien. These reasons are included in the IRS Code in Sections 6325(d)(1) and 6325(d)(2). Lien subordination under Section 6325(d)(1) is granted if refinancing of a taxpayer’s property will provide a taxpayer with funds to full pay the tax liability, or at least to make a payment equal to the equity that is obtained. The IRS interest and penalties accumulate very fast, so it is often beneficial for a taxpayer to use this method to decrease the tax debt.

Another basis for the tax lien subordination can be if the refinancing a property would decrease a taxpayer’s monthly mortgage payments and, therefore, increase disposable income, which can be used to make larger monthly payments to the IRS for the tax liability. Section 6325(d)(2) authorizes tax lien subordination for this particular reason.

The IRS requires form 14134 – Application for Certificate of Subordination of Federal Tax Lien to be completed for this purpose. It usually takes 45 days or more for the lien subordination request to be processed by the IRS and reviewed by the IRS Advisory Group Manager.

If the IRS grants a lien subordination, you might be required to send a payment before the IRS will send the Certificate of Subordination to you. However, if your request to subordinate a lien is based on Section and 6325(d)(2) of the IRS Code, you don’t have to make a payment to get your certificate.

If the IRS rejects your request to subordinate a lien, you can appeal this decision, but you need to make sure that your Collection Appeal Request is received before the deadline indicated on the IRS letter.

Although it is possible to file form 14134 by yourself, hiring a tax resolution specialist to submit this form and, if necessary, to negotiate a lien subordination on your behalf, will save you lots of time, and give you a better chance of success.


Expat Taxes – Paying Taxes When You Live Abroad

When you live out of the US and work out of the US, you still owe taxes to your country of citizenship. This is called an expat taxes. Though you have severed many of your ties to home, you will always remain an American. With all the wonderful things that come with that, there also come taxes.

America still lays claim to you as a citizen in the payment of taxes. Paying taxes when living abroad gets a bit interesting – the international section of the code is said to be the most complicated one (And remember the US tax code is known for being complicated already). If you are not careful about your tax planning strategy, the IRS may flag you and keep a close watch over you; keep in mind that with proper planning and reporting, guided by a qualified professional, you will not have to worry about compliance and an IRS audit would not result in any penalties or taxes. (expat taxes)

If you lived abroad full time last year or at least 330 days out of the 365 days of the year, you probably qualify to take the Foreign Earned Income Exclusion. This allows you to exclude up to $91,500 of your earned income for the year. Earned income counts as everything that you earned from your job during the year. This does not include income acquired in other ways like rentals, dividends, interest earned, etc.

If you are married, and your spouse also works, you may double the amount of the exclusion on your expat taxes. Expats may also claim an exemption for their housing costs. This amount is above the general housing exclusion that the Federal government has set up. In addition, there are foreign tax credits that can be claimed on your expat taxes. When you work abroad you may have to pay foreign taxes as well as US taxes. These foreign tax credits can help to relieve the burden of paying taxes twice. In most cases, you will be able to offset your US taxes enough that you will not have to pay redundant taxes.

The US has established tax treaties with more than 60 foreign countries. This means that they have negotiated tax codes with other countries to make sure that you don’t have to pay taxes twice. It also means that the foreign country will honor the taxes you pay to the US and make those like a credit on their tax forms. There are perks specific to each country so check out the treaty for where you live. It is always a good idea to file expat taxes even when you live abroad; you are not invisible to the IRS even if you don’t live in the US.