When the Internal Revenue Service places tax liens on homes in Texas and around the country, those liens could keep the homeowners from being able to sell their properties. It is an overly burdensome process designed to make sure people stay current on their taxes.
A homeowner can have a tax lien can attached to a property when he or she fails to pay taxes. In other words, with a lien, the IRS places a claim against any proceeds from the home. The IRS will remove the lien when the debt is paid, or when the homeowner and the tax agency come to terms on a repayment schedule.
A lien attaches to a property for a set period of time and can expire. That does not mean a taxpayer, or a home, for that matter, is off the hook. A lien can still attach to a taxpayer or other property.
Even if the tax debt has been paid and the lien satisfied, a deal to sell the home might not go through without a hitch. At closing, a title officer or an attorney likely will want the seller to present a form verifying the lien’s release to make sure the buyer does not face any problems in the future. When a buyer completes a home purchase, the expectation exists that there will be no IRS issues.
Before closing, a title agent will determine whether a property has a lien, which the seller will have to satisfy with the IRS. An expired lien should not delay a home sale if the IRS has not renewed it.
Once the sale has gone through, however, the settlement agent might not release the money to the seller without assurance from the IRS that the lien has been satisfied. The settlement agency will want verification that the IRS no longer wants its share of the proceeds.
Should the IRS attach a lien to a property, the owner should remain proactive in working with the IRS to settle the debt. The owner then should secure paperwork indicating the release of a lien and safeguard the documentation so that a technicality will not impede a future sale.
Source: Tribune Media Services, “IRS lien will often kill home sale,” Ilyce Glink and Samuel Tamkin, May 12, 2012