Subordination Of IRS Liens

Outstanding IRS liabilities can create many issues for taxpayers. To pay all or part of a liability, taxpayers may be required to seek a loan using personal or real property as security. However, this process can be complicated by the filing of a lien on the property by the IRS.

Fortunately, § 6325(d) of the Internal Revenue Code permits the "subordination" of federal tax liens (i.e., the placement of liens behind other loans in terms of priority). The IRS has procedures in place for taxpayers to request subordination, which are discussed briefly below.

Publication 784

IRS Publication 784 discusses the procedure for applying for a "certificate of subordination" of a federal tax lien. The publication generally provides that the taxpayer must complete and submit IRS Form 14134, and the IRS will review and make a determination as to whether to grant the certificate. Granting the certificate is entirely within the IRS's discretion.