Navigating Home Sale with an IRS Tax Lien: Moving to a New Home

Introduction

Moving to a new home is an exciting process, but it can become complicated when you have an IRS tax lien on your current property. This article will guide you through the steps and considerations when dealing with an IRS lien while moving to a new residence.

Understanding IRA Tax Liens

An IRS tax lien is a legal claim placed on your property by the Internal Revenue Service (IRS) due to your failure to pay a tax debt. This lien can significantly impact your ability to sell your home before moving to a new one. Despite the presence of an IRS lien, it is still possible to move out of your current home, but you must address the lien first.

Options for Dealing with an IRS Tax Lien

When you have an IRS tax lien, the most crucial step is to take care of the lien before moving. Here are some options to consider:

Pay Off the IRS Lien: The simplest solution is to pay the full amount of the lien. Once the lien is paid, it will be satisfied, and you can then proceed with selling your home. Set Up a Payment Plan: If you cannot afford to pay the full amount at once, you can set up a payment plan with the IRS. This option allows you to pay off the lien over time, but it will still need to be addressed before you can sell your home. Pay Off the Lien at Closing: If you find a buyer for your home, you can arrange to have the lien paid off at the closing of the sale. This can be an effective option if the sale proceeds are sufficient to cover the lien and other liens, such as your mortgage.

Implications for Home Sale

When you sell a home with an IRS tax lien, the lien must be settled before the title can be transferred. The IRS will take priority over other lienholders, including your mortgage lender. If the lien amount exceeds the net proceeds from the sale, you may need to negotiate with the IRS to accept a lower amount. Alternatively, you might need to find a buyer who is willing to accept the lien and secure a sales contract that includes this provision.

Dealing with Credit Card Liens

It's important to note that other creditors, such as credit card companies, can also file liens on your home. While these liens may have different priority levels, they will still impact the home sale process. If your credit card company has filed a lien on your home, you will need to address this before selling the property. In some cases, the credit card company might accept a lower amount, but if they do not, it can significantly affect the sale proceeds.

Preventative Measures

To avoid the complexity and financial burden of an IRS tax lien, it is advisable to establish a payment plan with the IRS early on. By doing so, you can address any tax debts before they escalate to the point where a lien is filed. This proactive approach can save you stress and financial strain in the long run.

Conclusion

Moving to a new home with an IRS tax lien can be challenging, but with proper planning and action, you can successfully navigate the process. Always prioritize paying off the lien before selling your home, and consider setting up a payment plan if immediate payment is not feasible. If you encounter liens from other creditors, such as credit card companies, make sure to address these before you decide to sell your property. By doing so, you can ensure a smoother transition to your new home.