Any experience with having the IRS lien moving to 2nd position?

Question

I have a client that has an IRS tax lien.  He is going to negotiate a partial payment with the IRS, as part of the deal the IRS will (supposedly) agree to move their lien into 2nd position.  I have a lender that said that will still allow financing if the IRS moves to 2nd position (non qm of course).  Has anyone been involved with a similar event?

Ashish Acharya · Answer

@Zach Wain,

IRS lien subordination is a real process, but it's a formal request under Form 14134, not something that automatically happens as part of a partial payment agreement. Make sure your client's negotiation actually includes filing that subordination request specifically, agreeing to a partial pay plan alone doesn't move the lien to second position on its own.

The IRS generally wants to see that subordination either increases their ultimate collection, like through refinance proceeds paying down the liability, or at least doesn't reduce what they'd collect. If the cash out from this refinance isn't earmarked to pay down the IRS debt, that could be a sticking point in getting the subordination approved. Also confirm the underlying liability isn't still growing with penalties and interest during this process, a partial payment agreement doesn't stop those from accruing, and the lender is going to want updated payoff figures close to closing, not what was negotiated months earlier.

Happy to connect!

Zach Wain · Answer

Tremendous info!  Thank you for the input

Greg Scott · Answer

Commercial development is not part of the IRS charter.