IRS NOTICE REFERENCE
Lien Subordination
The Notice of Federal Tax Lien (NFTL) can stop or delay refinancing of home mortgages, other loans, or third-party collection of business accounts receivable. Applying for a Certificate of Subordination of the NFTL can m…
General information only. Not legal or tax advice.
Notice details
- Notice code
- Lien Subordination
- Category
- Account and informational
- Severity tier
- Tier 1 — Routine. Informational or administrative notice; no response typically required.
- Source
- IRS Taxpayer Advocate Service
What this notice is
The Notice of Federal Tax Lien (NFTL) can stop or delay refinancing of home mortgages, other loans, or third-party collection of business accounts receivable. Applying for a Certificate of Subordination of the NFTL can move a bank’s claim to property ahead of the IRS’s claim.
Source: IRS Taxpayer Advocate Service. Reproduced for reference. General information — not legal or tax advice.
What the IRS says to do
When a NFTL is filed because you owe taxes, then y ou must decide if a certificate of subordination is right for your situation. Does my loan qualify as a Pu r chase Money Mortgage (PMM) or Purchase Money Security Interest (PMSI) ? Subordination isn’t needed i f you are buying real property (like a home) or personal property ( like a boat) , because you r loan can q ualify as PMM or PMSI . To qualify: T he loan must meet local law s . The newly purchased property guarantees the loan. I f the loan doe s n’t get paid, then the bank can claim the property. T he bank loan moves ahead of the government ’ s claim to the property when the pu rchase price equals the loan amount . See Publication 785
This is the IRS’s own guidance reproduced from the IRS notice page. It describes the IRS’s process — it is not legal or tax advice from TaxRiskOS.
Official IRS reference
Read the official notice page on IRS.gov: https://www.taxpayeradvocate.irs.gov/notices/lien-subordination/
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