IRS Releases Publication 784 (6/2010), Instructions on How to Apply for a Certificate of Subordination of Federal Tax Lien

 

1. Complete Form 14134, Application for Certifcate of Subordination of Federal Tax Lien attached with this publication.

2. Mail the completed Form 14134 and the appropriate attachments to:

IRS, Attn: Advisory Group Manager (Refer to Publication 4235, Collection Advisory Group Addresses for the correct address. The correct address is the office assigned to the location where the property is located.)

 

1. Enter the name and address of the individual(s) or business as it appears on the Notice(s) of Federal Tax Lien (NFTL). A second name line is provided if needed.

2. Enter, if known, the last 4 digits of the social security number (SSN) or full employer identifcation number as it appears on the NFTL.

3. Enter, if known and if applicable, the last 4 digits of any spousal SSN (secondary SSN) associated with the tax debt listed on the NFTL.

4. Provide a daytime phone number and a fax number.

 

1. Check the box on the first line of Section 2 if you are both the taxpayer and the applicant. If you are not the taxpayer, attach a copy of the lien.

2. If you have checked the box indicating that you are the taxpayer and your information is the same as listed on the lien, enter "same as taxpayer" on the name line.

3. If you are not the taxpayer or you are the taxpayer but your information is no longer the same as the information on the Notice of Federal Tax Lien, enter your name (include any name changes), current address, daytime phone number and fax number.

4. If you are not the taxpayer, enter in the box next to "Name" your relationship to the taxpayer (e.g. parent, uncle, sister, no relation, etc.).

 

1. Check the box on the first line of Section 3 if you are both the property owner and the applicant.

2. Enter the name of the property owner. Or if you have checked the box indicating you are both the applicant and the property owner, enter, "same as applicant".

3. Enter the property owner's relationship to the taxpayer (e.g. taxpayer, parent, no relation, etc.).

 

1. Check the box on the first line of Section 4 if you are attaching a Form 8821 (Tax Information Authority) or Form 2848 (Power of Attorney) with your application. If you are attaching one of these forms, please make sure it is completely filled out, signed, and dated. You must provide one of these forms if the representative represents an interest other than the taxpayer.

2. Enter the name, address, phone number, and fax number of your representative in this action. The IRS will work with you and your representative to process your application. Or enter "NA" on the name line if you are not using a representative.

3. Enter whose interest the representative represents (e.g. taxpayer, lender, title company, etc.). This allows the IRS to determine what information can be shared with the representative.

 

1. Enter the company name, contact name, phone number, and fax number for the lender you are requesting the United States subordinate its interest to.

2. Enter the type of transaction. For example, a loan consolidation or refinance often prompts a subordination request.

 

1. Enter the amount of your existing or outstanding financing.

2. Enter the amount of new financing you are seeking.

3. Enter the amount anticipated being paid toward the United States' interest (For applications requested under 6325(d)(1) only).

In this example the United States' interest is the equity you obtain from your refinanced loan after paying off the existing loan of $145,000 and paying the closing costs to obtain the loan. ($200,000 property value × 80% loan to value ratio = $160,000 refinance loan amount. $160,000 - $145,000 loan payoff = $15,000 potential equity. $160,000 × 3% = $4800 closing costs to obtain the loan. $15,000 potential equity - $4,800 closing costs = $10,200) The IRS would ask for $10,200 in return for the United States subordinating its interest to the refinanced loan. The lien remains on the property but the refinanced loan has priority over the lien.

4. 6325(d)(2) - a subordination may be issued under this section if the IRS determines that the issuance of the certificate will increase the amount the government realizes and make collection of the tax liability easier. This might involve a refinance to a lower interest rate which would, if the subordination were granted, allow a larger monthly repayment rate on the tax liability. Or the situation might be more complex. For example, AAA Auto Sales currently pays the IRS $2000 per month on a $120,000 tax debt. Their inventory needs replenishing but their wholesaler is reluctant to provide added inventory because of the federal tax lien. AAA requests subordination and provides the IRS with documentation that an inventory replenishment of 500 cars could allow them to increase their monthly payment to $3000 as well as increase their pay back rate to bi-weekly. In this example the United States' interest would be second on the new inventory, if the subordination is granted.

For applications under section 6325(d)(2), complete and attach a signed and dated statement describing how the amount the United States may ultimately realize through this subordination will increase and how collection will be facilitated by the subordination.

5. 6325(d)(3) - Questions and applications for this section refer to Publication 1153 for instructions.

 

1. Enter a detailed description of the collateral you will use for the loan or other financing. This is the collateral on which you want the lien interest subordinated to the loan or financing. If this is real estate, you must provide the legal description.

2. When the property is real estate include the type of property. For example, 3-bedroom house; etc. When the property is personal property include serial or vehicle numbers, as appropriate. For example, 2002 Cessna twin engine airplane, serial number AT919000000000X00; etc.

3. Provide the property's physical address if it is real estate or provide the physical address where the property is located, if it is personal property.

4. Check the appropriate box to indicate whether you attached a copy of the title or deed to the property.

 

1. Check the "Attached" box after "Appraisal" to indicate whether you have attached an appraisal completed by a disinterested third party. This is typically a professional appraisal providing neighborhood analysis; description of the site; description of the improvements; cost approach; comparable sales; definition of market value; certification; contingent and limiting conditions; interior and exterior photos of the property; exterior photos of comparable sales used; comparable sales location map; sketch of subject property showing room layout; food map and qualifications of the appraiser. This type of appraisal is not required for a certificate of subordination.

2. Check the appropriate box under the "Or One of the Following Valuations" section to indicate which type of property value verification is attached with your application.

 

1. Check the "Attached" box if you have attached copies of the lien(s) with your application.

2. If you checked the "no" box list the System Lien Identification Number (SLID) found in the top right hand box of the lien document, if available. If you do not have the numbers enter "unknown" in the first box.

 

1. Check the "attached" box if you have attached the proposed mortgage contract and describe how subordination is in the best interests of the United States

2. If you checked the "no" box, describe how subordination is in the best interests of the United States.

 

1. Check the "attached" box if you attached the title report. This is required for subordination.

2. If you checked the "no" box and the title report is not attached, use the space provided to list any encumbrances (liens or claims) against the property and whether those encumbrances are senior to the United States' lien interest. Include the name and address of the holder; description of the encumbrance, e.g., mortgage, state lien, etc.; date of agreement; original loan amount and interest rate; amount due at time of application; and family relationship, if applicable.

3. If any mortgages listed on your title report are home equity lines of credit (HELOCs), the NFTL takes priority over advances made via the HELOC on the 46th day after the NFTL is fled. This means any advances made to you more than 46 days after the NFTL is fled, were made subject to the NFTL. The advances need to be included in the equity interest to which the United States attaches. To make an accurate value determination and to avoid processing delays with your application, provide documentation on any HELOC advances from the 46th day after the NFTL was fled, through the date you submit your application, and include expected advances through the date the certificate will be issued.

4. Attach a separate sheet titled "Section 12" with the information in item # 2 and # 3 above if there is not enough space provided on the form.

 

1. Check the "attached" box if you attached the proposed closing statement. This statement is often referred to as a HUD-1.

2. If you checked the "no" box and you did not attach the proposed closing statement, use the space provided to itemize all proposed costs, commissions, and expenses to refinance the property.

3. Attach a separate sheet titled "Section 13" with the information in item # 2 above if there is not enough space provided on the form.

 

1. Check the "attached" box if you have attached other documents relevant to the subordination application. This could include affidavits or court documents.

2. Check the "no" box if you do not have any additional documentation.

 

• Subordination under 6325(d)(1) requires a payment, but do not send a payment with the application. The Advisory Group Manager will notify you after determining the amount due and when to send payment.

• Subordination under 6325(d)(2) does not require a payment.

 

• Under 6325(d)(1), you will receive the certificate upon receipt of the amount determined to be the interest of the United States in the property subject to the federal tax lien.

• Under 6325(d)(2), you will receive the certificate after your application has been investigated and the information verified. The Advisory Group Manager will notify you of the decision and provide you with a projected date for mailing the certificate of subordination.

 

• Recordkeeping 2 hr., 45 min.

• Learning about the law or the form 2 hr.

• Preparing the form 1 hr., 30 min.

• Copying, assembling, and sending the form to the IRS 85 min.