With a Lien Subordination, you are able to secure financing for the purpose of making a payment towards your federal tax liability. A Federal Tax Lien gives the IRS a secured interest in any property that is subject to the Lien. Because of this secured interest, prospective banks are not willing to loan money when a Federal Tax Lien has been filed, unless they can obtain a security interest superior to that of the IRS Lien.
By subordinating the Lien, the IRS allows a lender to take a priority interest ahead of any IRS claims on value of the property. In return, the IRS will require that it receive ALL proceeds in excess of sales costs and amounts due to Lien holders who are a priority to the IRS (the bank that holds your loan, etc...), up to the amount of taxes owed.
There is no specific IRS Form for Subordination or discharge of a Federal Tax Lien and the process is very specific. As long as the IRS is receiving the full proceeds (other than closing costs) from the sale or refinance of a property, the IRS will usually grant a Lien Subordination.
The normal processing time for a subordination can be as long as 30 to 60 days, however, when there is danger of losing the loan, the IRS may be willing to expedite the certificate at our request.
