Application for Release of Right to Redeem Property from IRS After Foreclosure

In a mortgage foreclosure, any judgment liens that were recorded after the mortgage will be wiped out by the foreclosure. Any surplus funds after the foreclosing lender's debt has been paid off will be distributed to other creditors holding junior liens, like second mortgages and judgment lienholders.

You need to submit form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien at least 45 days before the sale or settlement meeting. Publication 783 provides the instructions for completing form 14135. You will need to describe the property, its appraised value, and other information.

An IRS tax lien lasts for 10 years, or until the statute of limitations on your tax debt expires.

In cases where the mortgage lender recorded its lien (the mortgage) before the IRS records a Notice of Federal Tax Lien, the mortgage has priority. This means that if the lender forecloses, the federal tax lien on the homebut not the debt itselfwill be wiped out in the foreclosure.

Foreclosure Eliminates Liens, Not Debt Following a first-mortgage foreclosure, all junior liens (including a second mortgage and any junior judgment liens) are extinguished and the liens are removed from the property title.

Paying your tax debt - in full - is the best way to get rid of a federal tax lien. The IRS releases your lien within 30 days after you have paid your tax debt. When conditions are in the best interest of both the government and the taxpayer, other options for reducing the impact of a lien exist.

If there is a federal tax lien on your home, you must satisfy the lien before you can sell or refinance your home.Taxpayers or lenders also can ask that a federal tax lien be made secondary to the lending institution's lien to allow for the refinancing or restructuring of a mortgage.

Paying your tax debt - in full - is the best way to get rid of a federal tax lien. The IRS releases your lien within 30 days after you have paid your tax debt. When conditions are in the best interest of both the government and the taxpayer, other options for reducing the impact of a lien exist.

The seller can request a release from the IRS and your purchase proceeds. If the purchase price is high enough to pay off the lien amount and satisfy the existing mortgage, you will be able to buy the property using standard methods.