Instructions On How To Apply For Certificate Of Discharge From Federal Tax Lien (Page 2 of 4) in pdf

6325(b)(1) – a discharge may be issued under this pro-

Entireties property, a deposit or an acceptable bond

vision if the value of the taxpayer’s remaining property

totaling one-half the government’s interest in the property

encumbered by the federal tax lien is equal to at least twice

must be made. If you are the property owner (but not the

the amount of the federal tax liability secured by the lien

taxpayer, i.e., you are not responsible for the tax liability)

and any encumbrance entered into before the IRS filed its

and you make a deposit or post an acceptable bond to

public notice of the lien. If there are mortgages, state and/

obtain a discharge under this section, you have 120 days

or local taxes, mechanics liens, etc., the amount of these

to file an action in federal district court, under section

debts would be added to the amount of the tax liability and

7426(a)(4), challenging the IRS’ determination of the

multiplied by 2.

government’s lien interest. This is the exclusive remedy

Example

available to the third party for the return of the deposit

Tax liability

$15,500

or accepted bond or a portion thereof. An administrative

Other Debts +

23,334

request for refund and a refund suit in district court is not

38,834

available. The Circular 570, available at

gov/c570/index.html

contains a list of companies certified

$77,668

by the Secretary of the Treasury as providers of acceptable

The property remaining subject to the lien must be at least

securities.

$77,668.

6325(c) – a discharge of property subject to an Estate Tax

6325(b)(2)(A) – a discharge may be issued under this

Lien is not covered in this publication. Please refer to

Form

provision when the tax liability is partially satisfied with an

4422.

amount paid that is not less than the value of the United

States’ interest in the property being discharged. For exam-

Section 8 - Description of Property

ple, the IRS has a lien totaling $203,000 and with the ...

Enter a detailed description of the property to be discharged

• Property selling for:

$215,000

from the federal tax lien.

• Minus encumbrances senior to IRS lien:

$135,000

When the property is real estate include the type of prop-

• Minus proposed settlement costs:

$ 15,000

erty, for example, 3-bedroom house; etc. When the property

• The IRS lien interest equals:

$ 65,000

is personal property include serial or vehicle numbers, as

After the IRS receives and applies the $65,000 in partial

appropriate, for example, 2002 Cessna twin engine air-

satisfaction of the tax liability, there remains an outstanding

plane, serial number AT919000000000X00; etc.

tax debt of $138,000.

Provide the physical address if real estate or physical loca-

In the case of Tenancy by Entireties property, the United

tion address if personal property.

States is generally paid one-half of the proceeds in partial

Check the appropriate box to indicate whether you attached

satisfaction of the liability secured by the tax lien.

a copy of the title or deed to the property.

6325(b)(2)(B) - a discharge may be issued under this

If you are applying under 6325(b)(1) check the “Attached”

provision when it is determined that the government’s

box and attach copies of the titles or deeds for property

interest in the property has no value. The debts senior to

remaining subject to the lien. If you are not applying under

the federal tax lien are greater than the fair market value of

6325(b)(1) check the “NA” box.

the property or greater than the sale value of the property.

Submit a copy of the proposed escrow agreement as part

of the application.

Section 9 - Appraisal and Valuations

6325(b)(3) – a discharge may be issued under this provi-

Check the “Attached” box after “Required Appraisal” indi-

sion if an agreement is reached with the IRS allowing the

cate whether you have attached the required appraisal by

property to be sold. Per an escrow agreement the sale

a disinterested third party. This is typically a professional

proceeds must be held in a fund subject to the claims of the

appraisal providing neighborhood analysis; description of

United States in the same manner and priority the claims

the site; description of the improvements; cost approach;

had prior to the property being discharged. For example,

comparable sales; definition of market value; certification;

there are two mortgages senior to the IRS tax lien total-

contingent and limiting conditions; interior and exterior

ing $32,000 and $5,000. The government’s interest in the

photos of the property; exterior photos of comparable sales

property is $40,000 and there are liens on the property

used; comparable sales location map; sketch of subject

junior to the IRS lien in the amount of $3,000, $12,000 and

property showing room layout; flood map and qualifications

$2,990. The proceeds from the sale would be dispensed by

of the appraiser.

paying the debts in the following sequence.

Check the appropriate box under the “Plus One of the Fol-

a. $32,000

lowing Additional Valuations” section to indicate which other

b. $5,000

type of property value verification is attached with your

c. $40,000

application.

d. $3,000

Note: For applications under IRC 6325(b)(1), valuation

e. 12,000

information described above must also be provided for

f. $2,990

property remaining subject to lien.

Submit a copy of the proposed escrow agreement.

Note: For property being sold at public auction, provide

6325(b)(4) – a discharge will be issued under this provision

the date and place of the sale, the proposed amount for

to a third party who owns the property if a deposit is made

which the property will be sold, and a statement that the

or an acceptable bond provided equal to the government’s

United States will be paid in the proper priority from the

interest in the property. In the case of Tenancy by

proceeds.

Publication 783 (Rev. 6-2010)

Catalog Number 46755I

Department of the Treasury Internal Revenue Services

Instructions On How To Apply For Certificate Of Discharge From Federal Tax Lien Page 2

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