How an IRS lien ends up on your house
A federal tax lien is the government’s legal claim against your property when a tax debt goes unpaid. The IRS says it exists after the IRS assesses the balance, sends a bill (a notice and demand for payment), and the debt isn’t paid in time. Under 26 U.S.C. 6321, it attaches to all your property and rights to property, including real estate you own now and property you acquire later.
To put other creditors and buyers on notice, the IRS files a public Notice of Federal Tax Lien. That filing is what shows up in a title search on your Summit or Stark County house and stops a closing until it’s dealt with.
The lien isn’t the same as a levy. A lien secures the IRS’s claim; a levy actually seizes property. You can still sell a house with a lien on it, with the IRS’s cooperation.
Option 1: pay the lien in full from the sale
If the sale price covers your mortgage, the closing costs and the full tax debt, this is the simplest path.
- Call the IRS Centralized Lien Operation at 800-913-6050 for a payoff, or ask the revenue officer assigned to your case.
- Give the payoff to the title company, which pays the IRS from your proceeds at closing.
- Once the liability is satisfied, 26 U.S.C. 6325(a) requires the IRS to issue a certificate of release within 30 days.
The title company may still want a written payoff in hand before it schedules closing, so request it early.
Option 2: a certificate of discharge for this property
When the lien can’t be paid in full from the sale, you ask the IRS to discharge the house, which removes the lien from that one property while the rest of the debt remains. IRS Publication 783 describes the process:
- complete Form 14135, Application for Certificate of Discharge of Federal Tax Lien;
- mail it to IRS Advisory Consolidated Receipts, 7940 Kentucky Drive, Stop 2850F, Florence, KY 41042 (questions: 859-594-6090);
- submit it at least 45 days before the closing date;
- attach a professional appraisal by a disinterested third party plus one more type of valuation, a copy of the title or deed, copies of the liens, and an escrow agreement where the provision calls for one.
The application also asks for the proposed sale amount and how much the IRS can expect from the proceeds, along with the title or escrow company handling the closing.
You don’t need a representative to apply. If someone other than the taxpayer applies, such as the buyer or a lender, they attach a copy of the lien and, to receive information, Form 8821 or 2848.
Which discharge provision fits your sale
Publication 783 lists the code sections the IRS can use. The three that come up in home sales:
| Section | When it applies | What the IRS gets |
|---|---|---|
| 6325(b)(2)(A) | The IRS’s interest in the house has some value | A payment equal to that interest, from the proceeds |
| 6325(b)(2)(B) | Senior debts exceed the house’s value or sale price | Nothing; its interest has no value |
| 6325(b)(3) | The IRS agrees to let the sale close with proceeds held back | Proceeds held in escrow, paid by priority later |
Publication 783’s own example under 6325(b)(2)(A): a house selling for $215,000, with $135,000 of senior encumbrances and $15,000 in settlement costs, leaves the IRS a $65,000 interest. The IRS takes the $65,000 for the discharge, and the remaining $138,000 of a $203,000 lien stays as a debt.
Short sales and the IRS
In a short sale, the mortgage lender is accepting less than it’s owed, so the IRS usually has nothing coming from the proceeds. That is the 6325(b)(2)(B) no-value case, and Publication 783 asks you to submit a copy of the proposed escrow agreement with the application.
Because the mortgage lender’s approval and the IRS’s discharge both have deadlines, line them up: get the short sale approval letter, then apply for the discharge at least 45 days before the closing date in that letter. The short sale guide covers the lender side.
Foreclosure, tax sales and federal liens
A forced sale doesn’t always clear an IRS lien the way it clears other junior liens:
- When the United States is named in a foreclosure on a senior lien, 28 U.S.C. 2410(c) gives it a right to redeem. For a lien under the internal revenue laws, that period is 120 days, or the state’s redemption period if longer.
- Ohio’s Board of Revision tax foreclosure auctions convey abandoned land free of other liens except federal tax liens, under R.C. 323.73(D).
A buyer at one of these sales can be left holding a house that is still subject to the federal lien. A voluntary sale with a discharge certificate avoids that by clearing the lien from the title at closing.
Other IRS lien tools to know
The IRS describes two more options that don’t remove the lien from a sale but may help:
- Subordination (Publication 784) lets a lender move ahead of the IRS, which can make a refinance possible.
- Withdrawal (Form 12277) removes the public notice, for example after the lien is released or under a qualifying direct-debit installment agreement for balances of $25,000 or less.
For the bigger picture of what else might be recorded against your house, see how to check for liens on your property and our page on selling a house with liens. A tax professional or enrolled agent can handle the IRS side. If you need an as-is price and a firm closing date to put on Form 14135, we can give you a written offer.
