The Basics of Federal Tax Lien Subordination: An Overview

ave calvar AyMIsq7f9GY unsplash


One of the most important things to remember as a taxpayer is the payment of taxes owed to the government. However, if you cannot pay your taxes, it’s essential to understand the basics of federal tax lien subordination. 

This overview will help you know what federal tax lien subordination entails, how it works, and why it is crucial for taxpayers.

What is Federal Tax Lien Subordination?

Federal tax lien subordination is a process by which a taxpayer can obtain a loan or mortgage while an existing federal tax lien is on their property. This process allows the taxpayer to obtain financing while the government’s tax lien remains.

How Does Federal Tax Lien Subordination Work?

Generally, when a taxpayer owes taxes to the government, the government may file a tax lien against the taxpayer’s property. The tax lien gives the government a legal claim against the property, giving them the right to seize it if the taxpayer fails to pay their taxes.

When a taxpayer seeks financing, the lender will typically conduct a title search on the property to determine if there are any outstanding liens or claims against it. If there is an existing federal tax lien on the property, the lender may require that the lien be paid off before approving the loan or mortgage.

However, if the taxpayer cannot pay off the tax lien, they may seek a federal tax lien subordination. This process involves the taxpayer asking the government to allow the lender to have priority over the government’s tax lien. In other words, if the taxpayer fails to pay their taxes and the government moves to seize the property, the lender would be paid first from the sale proceeds.

Why is Federal Tax Lien Subordination Important?

Federal tax lien subordination is vital for taxpayers because it allows them to obtain financing even when there is an existing federal tax lien on their property. With this process, taxpayers may find getting the funding they need more accessible.

Additionally, federal tax lien subordination can be helpful for taxpayers who are striving to pay their taxes. By allowing the taxpayer to obtain financing, they can use the funds to catch up on their tax payments, avoiding further penalties and interest.

Notably, federal tax lien subordination only partially eliminates the tax lien. The lien remains, and the government maintains its legal claim against the property. However, with compliance, the lender is given priority over the lien, making it easier for the taxpayer to obtain financing.

How Must You Handle Your Federal Tax?

When handling your federal tax obligations, it is essential to do so with care and attention to detail. One of the best means to ensure that you are meeting all of your legal requirements and maximizing your tax savings is to hire the services of qualified tax attorneys.

A tax attorney can provide various tax services to handle your federal tax. They can help you better understand the complex tax laws and regulations that govern your specific situation, and they can provide you with expert guidance on minimizing your tax liability while remaining fully compliant with all relevant laws.

In addition to these benefits, a tax attorney can provide you with valuable assistance in an audit or other tax-related dispute. They can represent you before the IRS or other tax authorities, helping protect your rights and interests and ensuring you are not unfairly penalized for any mistakes or oversights.


Federal tax lien subordination is a process by which a taxpayer can obtain financing while there is an existing federal tax lien on their property. This process allows taxpayers to get the financing they need while the government’s tax lien remains in place. Taxpayers need to understand this process and how it works, as it can help obtain financing and catch up on tax payments. If you are a taxpayer with an existing federal tax lien on your property, it’s worth considering federal tax lien subordination as an option for obtaining financing.

The Law Offices of Stephen B. Kass, P.C. is a reputable New York law firm and CPA firm that provides clients with top-notch legal and financial services. With our team of the best tax lawyers in NYC, our firm has a proven track record of successfully handling tax settlements, IRS litigation and negotiations, and business bankruptcy cases. If you face legal or financial challenges, do not hesitate to contact us for expert guidance and representation.

Contact Us


Featured Blog Post