The Internal Revenue Service said Tuesday that it would try to make it easier for homeowners in financial straits to refinance or sell their homes.
The plan announced by IRS Commissioner Doug Shulman would speed up a process in which financially distressed homeowners may request that a federal tax lien be made secondary to liens by the lending institution that is refinancing or restructuring a loan.
Taxpayers will also be able to ask the IRS to discharge, or remove, its claim to a property in certain circumstances when the property is being sold for less than the amount of the mortgage lien.
“We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today,” Shulman said, stressing that “we don’t want the IRS to be a barrier to people saving or selling their homes.”
He said the program would focus on people who ordinarily pay their taxes in full but “because of these extraordinary times are getting behind in their tax payments.”
A tax lien is a legal claim the government attaches to property as security for a tax debt. The government notifies other creditors that it has a claim on the property.
The IRS can rule that its lien will be secondary to another lien, such as that of a lending institution, if it determines that taking a subordinate position will ultimately help with the collection of the tax debt. Taxpayers may apply for a subordination of a tax lien if they are refinancing or restructuring their mortgage.