Sunday, December 21, 2008

IRS liberalizes tax liens

In an effort to slow the rate of foreclosures, the IRS announced Tuesday that it will make it easier for financially distressed homeowners who are behind on their taxes to refinance or sell their homes.

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The IRS issues more than 600,000 tax liens a year against taxpayers who are delinquent on their taxes. When these liens are attached to homes, they can make it difficult for homeowners to refinance or sell their homes, IRS Commissioner Doug Shulman said.

"At the IRS, we need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today," Shulman said.

Toward that end, Shulman said, the IRS will:

n Accelerate homeowners' requests to make their federal tax liens subordinate to a lender's claims on the property. Many lenders won't refinance or restructure a loan unless their claim on the property has priority over all others.

Ordinarily, it takes about 30 days for the IRS to process an application to subordinate a tax lien. Shulman said he has assigned additional IRS employees to the program in an effort to speed up approval of those applications.

n Speed up requests for removal of a tax lien from homeowners who are selling their property for less than they owe on their mortgage. When a home has a tax lien against it, it's difficult for buyers to get a mortgage. Removing the lien won't relieve the taxpayers' obligations, Shulman said.

Benefits reliable taxpayers
Shulman said the measures will focus on taxpayers who have historically paid their taxes, but have fallen behind because of economic hard times. "The IRS is doing whatever it can, under the constraints of the law and common sense, to avoid getting in the way of people trying to save their homes or sell their homes," he said.

There are more than 1 million outstanding federal tax liens tied to real and personal property, the IRS said.

John Taylor, chief executive of the National Community Reinvestment Coalition, said he doubts the IRS program will have much of an impact on foreclosures. Instead of taking incremental steps, he said, the administration should launch "a meaningful foreclosure-prevention program, which involves getting control of these mortgages and having them modified in a substantive way."

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