New York Real Estate Lawyer Blog
How do you sell your distressed home or refinance your real estate if you have a federal or state tax lien?
Well, WSJournal.com reports that the IRS is trying to help themselves get paid for their tax liens more quickly, thereby speeding up relief to distressed homeowners trying to re-finance.
Under the new “expedited process,” the refinancing and sellers can find out more “quickly” how much they owe on a federal tax lien, so the lien does not delay or prohibit the transaction.
According to the article, there are more than one million federal tax liens against real estate or personal property, and IRS issues 600,000 fresh federal tax lien a year. That means that the federal government is making a formal claim against the property, and such claim needs to be resolved prior to closing, and before other creditors, even foreclosing banks.
The goal: the IRS will respond more quickly, thereby clearing the liens and allowing homeowners to proceed with refinancing or sales. Although it is unclear how much faster the new plan will make the process (or if it is just a public relations stunt), the IRS says they typically respond within thirty (30) days. What’s a bailout if the IRS can’t help distressed home owners directly.
Typically, the requests to the IRS take two forms in a distressed situation: First, you could ask the IRS to make its lien “secondary” or “subordinate” to the claim of the lender willing to refinance the distressed real estate. Or, if you are “upside down” and selling your home for less its value, the IRS might agree to “discharge” or “forebear” all or part of the claim for back taxes. That does not mean, necessarily that the tax debt is erased, but it does clear the distressed real estate and allow the sale or refinance.
Some states are taking the initiative also. For example, in some cases States are offering “amnesty” (not to prosecuting or penalizing) to those who voluntarily, before officials ask, pay what they owe, or agree to pay (offering reduced interest penalties).
The New York State Tax Department has launched a “voluntary disclosure” plan , which offers protection from criminal and civil penalties to all eligible taxpayers who voluntarily disclose and “correct” their “delinquent tax liabilities,” or who agree to obey the law. Under the plan, New York has raised approximately $12 million in one year, and are expecting a total of somewhere near $25 million from delinquent tax payers.
The bottom line: There are more options to settling your debts in Dutchess, Westchester, Rockland, Ulster and beyond because the government realizes that a dollar in the hand is better than 10 dollars in the bush.