Home›Resolution Options›Lien Subordination

IRS Resolution Options · Tax Liens

IRS Lien Subordination:
Move a Lender Ahead of the IRS

A federal tax lien can block a refinance or business loan because the IRS stands ahead of any new lender. Lien subordination solves that without removing the lien — it lets a specific creditor take priority over the IRS on an asset, so the financing can close. You apply using IRS Form 14134. See our flat-fee pricing →

Check If I Qualify — 60 Seconds (888) 334-5052

What is IRS lien subordination?

Lien subordination allows another creditor — such as a mortgage lender or equipment financier — to take priority over the IRS lien on a specific asset. The lien remains in place but moves to second position, allowing the financing to proceed. The IRS approves subordination when it determines the government's interest is adequately protected.

Typical timeline: Apply at least 45 days before closing

No IRS fee

Last Reviewed: 2026-06-10

Reviewed By: TaxCase Review Editorial Team, Reviewed by a licensed tax professional

Our Methodology Data Sources Editorial Standards

High Risk

Based on: A filed federal tax lien blocking your financing

A filed Notice of Federal Tax Lien is public and stands ahead of any new lender. Until it is subordinated, discharged, or paid, collection can keep escalating — so it is best addressed well before a closing date.

Bank levy possible with a single letter.
Wage garnishment is authorized.
Asset seizure review is underway.

Get a Free Risk Assessment

If you ignore this lien

What happens after a federal tax lien is filed

NOW
IRS files public notice. Credit bureaus notified. Anyone can see it.
30 DAYS
Penalty interest compounds daily. Balance grows automatically.
60 DAYS
IRS assigns a Revenue Officer. Collection action begins.
90 DAYS
Bank levy authority activated. IRS can freeze your account with 1 letter.
180+ DAYS
Wage garnishment, asset seizure, and property liens expand.

The earlier you act, the more options you have.

See What Options Apply to You

Subordination vs. Discharge vs. Withdrawal vs. Release

These four lien remedies are easy to confuse, but they do very different things. Subordination is the right tool when you need to borrow or refinance while the lien still exists:

Subordination

Keeps the lien in place but lets a specific creditor move ahead of the IRS in priority on an asset — so you can refinance or get a loan.

Discharge

Removes the lien from one specific piece of property so it can be sold or refinanced free of the lien, while the lien stays on your other assets.

Withdrawal

Removes the public Notice of Federal Tax Lien as if it had never been filed, cleaning up the public record.

Release

Ends the lien after the underlying debt is satisfied, though a record that the lien once existed remains.

When Lien Subordination Applies

The IRS grants subordination under two grounds in the tax code (Internal Revenue Code §6325(d)). It will agree when the move ultimately helps it collect:

You Pay the Subordinated Amount (§6325(d)(1))

You pay the IRS an amount equal to the interest it is giving up priority on. Dollar-for-dollar, the IRS is no worse off.

Subordination Aids Collection (§6325(d)(2))

The IRS determines that letting the creditor move ahead will ultimately increase or speed up what it collects — for example, a refinance that frees cash to pay the tax debt.

Refinancing a Mortgage

A common use: refinancing your home or rental at a lower rate when the IRS lien would otherwise stand ahead of the new lender.

Business or Equipment Financing

Securing a business loan, line of credit, or equipment financing so the company can keep operating and generate income to pay the IRS.

Why Subordination Matters

Access to Financing

Lenders rarely fund a loan when the IRS would stand ahead of them. Subordination clears that obstacle for a specific transaction.

Better Loan Terms

Refinancing at a lower rate or consolidating debt can free up cash flow — some of which can go toward paying down the IRS balance.

Keep a Business Running

For owners, equipment and working-capital financing can be the difference between continuing operations and shutting down.

How to Request Lien Subordination

Identify the Legal Basis

Determine whether you qualify under §6325(d)(1) (paying the subordinated amount) or §6325(d)(2) (subordination aids collection).

Complete Form 14134

File the Application for Certificate of Subordination of Federal Tax Lien, describing the lien, the asset, and the proposed transaction.

Attach Supporting Documents

Include the loan or refinance terms, a current appraisal or valuation, payoff statements, and a proposed closing statement.

Submit to IRS Advisory Early

Send the application to the IRS Advisory office at least 45 days before the closing so there is time to process it.

Deliver the Certificate at Closing

If approved, the IRS issues a Certificate of Subordination, which you provide to your lender and title company to complete the transaction.

Related Resolution Options

Lien Discharge

Free a specific property from a tax lien so you can sell or refinance it.

Lien Withdrawal

Remove the public Notice of Federal Tax Lien from the record.

Installment Agreement

Pay your balance over time on terms you can sustain.

Frequently Asked Questions

What is the difference between lien subordination and lien discharge?

Subordination keeps the lien in place but lets a specific creditor move ahead of the IRS in priority on an asset — so you can refinance or borrow. A discharge instead removes the lien from one specific property entirely. Subordination changes priority; discharge removes the lien from that asset.

What IRS form do I use to request lien subordination?

You apply using IRS Form 14134, Application for Certificate of Subordination of Federal Tax Lien. You explain the legal basis, describe the transaction, and attach supporting documents such as loan terms, an appraisal, and a proposed closing statement. Apply at least 45 days before the transaction.

Why would the IRS agree to subordinate its lien?

The IRS subordinates when it ultimately helps collection — for example, when you pay it an amount equal to the interest being subordinated, or when a refinance or loan frees up cash that helps you pay the debt. It will not subordinate just because it is convenient for you.

Does lien subordination remove the tax lien?

No. Subordination does not remove or reduce the lien — it only changes the priority order for a specific creditor and asset. The federal tax lien stays in place and continues to attach to your property. To clear a lien, look at a discharge, a withdrawal, or paying in full.

Romy Cruz, EA

Licensed Enrolled Agent

Licensed Enrolled Agent (EA) · 15 Years IRS Tax Resolution

Romy helps individuals and businesses resolve IRS tax issues including liens, levies, installment agreements, penalty relief, and offers in compromise.

Content is reviewed periodically for accuracy and updated to reflect current IRS guidance and regulations.

See If Subordination Can Unlock Your Financing

Our $399 case review examines your lien filing, the asset, and the transaction to determine whether a subordination, discharge, or another lien remedy is the right fit.