Getting Federal Tax Lien waived for a Tax Deed Auction property.

9 Replies | St. Louis, Missouri

Hello BP Fam. I recently won a bid at a Tax Deed auction in St. Louis. When the title report came back on this property, it showed a 57k IRS federal lien against this property. I can still bail on the property and get money back, but I prefer to keep it if I can. I heard that there are cases when a lien like this can be waived and cleared from the title. Does anyone have experience with this? 

Typically they get notified by the agency conducting the tax sale.  If not, I believe you simply have to give them Proper notice of the either case they have the right of redemption for 120 days, then their lien becomes invalid.  I’m sure it works that way with proper notice from the agency Prior to the sale, not positive about notifying them afterwards. Verify this with a local real estate attorney/title co.

@Wayne Brooks I heard that there is a tax lien unit within the IRS and I'm considering contacting them to get details. I believe these processes also depend on the location and whether the state and place is in judicial or non-judicial territory. 

@Steve Sherman From what I know the IRS typically doesn't foreclose on these liens, They expire after 10 years so you can wait them out. The IRS also will typically negotiate for pennies on the dollar if you don't want to wait the 10 years.

IRS liens and state treasury liens are the only liens (including mortgages) that I know of that are not extinguished when a tax deed is issued.

I have cancelled getting a tax deed in the past after finding out there was an IRS lien against the property. Knowing what I know now I would have accepted this property.

@John Underwood The tax lien was attached in 2010, so potentially, I could wait out 2 more years. However, I think I will try to contact the IRS and see if they can provide a waiver, since the lien has absolutely nothing to do with me. Thanks for your input!

@Steve Sherman There is a way to work with the IRS on this.  There are a couple of things. 1. You can file a disposition with the courts where the IRS will have 120 days to respond. If there is no response in that time frame you will be clear of the lien amount. This will require working with a lawyer.   2.  Follow the instructions given below:

You must apply for a certificate of discharge of property from Federal Tax Lien. You have to type up a letter (with specific instructions followed) and send it to  IRS Attn: Technical Services Group Manager 

Addressed to the IRS office in which the lien was filed.  This will result in the amount due which will be determined by the IRS.

You will find the instructions on the department of treasury internal revenue service publication 487 (Rev. 1-2006) Catalog number 46553K

Let us know how it goes.  If the property is worth it and the amount gets reduced it's a matter of completing the application.  Although it is a process, it can be done.