The Internal Revenue Service wants to step up for cash-strapped homeowners in Maryland and across the country.
Commissioner Doug Shulman this week announced the IRS will try make it easier for “financially distressed” homeowners to refinance or sell their homes.
The IRS will speed up a process where homeowners can request a federal tax lien be made secondary to the lien by the lending institution that is refinancing or restructuring a home loan.
Homeowners can’t sell their homes or refinance their mortgage unless the federal lien is transferred from their home to other property like another home or a car.
“These are clearly difficult times for the U.S. economy,” Shulman said. “Many homeowners are at risk of losing their homes.”
The IRS announced the expedited process as Maryland’s foreclosures in November increased nearly 11 percent from November 2007, the 18th largest increase in the country, according to RealtyTrac Inc. There were almost 3,500 foreclosure filings on Maryland properties in November, a 16.7 percent increase from October.
“We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today,” Shulman said. “We don’t want the IRS to be a barrier to people saving or selling their homes.”
A tax lien occurs when the government makes a legal claim to property as security or payment if a homeowner has a tax debt. The government then notifies other creditors that it has a claim on the property.
The IRS can rule that its lien will be secondary to another lien, such as that of a lending institution, if it determines that taking a subordinate position will ultimately help with the collection of the tax debt. Taxpayers or their representatives may apply for a “subordination” of a tax lien if they are refinancing or restructuring their mortgage.
Shulman said the program will focus on those people who ordinarily pay their taxes in full but “because of these extraordinary times are getting behind in their tax payments.”
It takes about 30 days to rule on a request for a subordination of a tax lien, but the IRS will work to speed up that process so there would be no delays for people trying to obtain new mortgage loans, Shulman said. The IRS urged people to contact the agency’s Collection Advisory Group early in the home sale or refinancing process.
“We’ve had this process in place,” said Fred Schindler, IRS director of collection processes. “It looks like the burden is on the taxpayer, but we want to go the extra mile and help. We want people to know the processes available and the options that are out there.”
The agency said it issues more than 600,000 federal tax lien notices annually and that currently there are more than 1 million outstanding tax liens tied to both real and personal property.
