How to Get a Tax Lien Discharge: Grounds, Form 14135, and Process

A federal tax lien attaches to everything you own, but the IRS can lift it from one specific piece of property so you can sell or transfer that asset while you still owe back taxes. That remedy is called a tax lien discharge, and you request it on IRS Form 14135 by showing the government will receive the value of its interest in the property you want to clear.¹ The lien stays on everything else you own, and your underlying tax debt continues until you pay it off or the collection statute expires.

What a Discharge Actually Does

A discharge removes the federal tax lien from one specific property named in the certificate. It does not reduce your tax debt, cancel the lien on your other assets, or stop collection activity on the remaining balance. What it does accomplish is making a sale possible: a federal tax lien does not disappear when property changes hands, so without a discharge the lien follows the property to the buyer. Title companies know this, and virtually none will insure a transaction where a federal tax lien clouds the title. Most buyers cannot get financing either, so the deal simply doesn’t close.

Three related IRS remedies solve different problems. A lien release wipes out the lien across all your property, and the IRS must issue one within 30 days after you pay the full balance (with interest and penalties) or the 10-year collection statute expires.² A subordination keeps the lien in place but lets another creditor jump ahead in priority, which is the normal tool for refinancing a mortgage. A withdrawal pulls the public Notice of Federal Tax Lien from the recording office but leaves the lien itself intact; it’s requested on Form 12277, not the discharge form.³ If what you need is a sale, discharge is the right tool.

The Five Grounds for a Discharge

Federal tax law authorizes the IRS to issue a discharge under five separate provisions. You only need to qualify under one.²

Part Payment of the Government’s Interest

This is the most common basis when you’re selling. You pay the IRS at least the value of its interest in the property, which is the fair market value minus all debts that have priority over the federal lien, such as a mortgage recorded before the lien was filed.¹ If your home is worth $400,000 and the senior mortgage balance is $350,000, the government’s interest is $50,000, and the IRS will expect at least that amount from the sale proceeds. The payment goes toward your tax debt but does not need to clear the full balance.

No-Value Discharge

When the debts ahead of the federal lien already exceed the property’s fair market value, the government’s interest is worth nothing. Picture a house worth $300,000 with a $320,000 senior mortgage: even a forced sale would leave nothing for the IRS. In that situation the IRS can discharge the lien because its claim on this particular property is effectively worthless.² The IRS generally expects you to give up all interest in the property after the transaction. You can’t keep control of a property the government just walked away from.

Double-Value Test

If you own enough other liened property, you can qualify without paying anything. The fair market value of your remaining liened property must be at least double the sum of your unpaid tax debt plus any liens on that remaining property that outrank the federal lien.² Most taxpayers with collection problems don’t have that kind of surplus, but when the cushion exists, the IRS can safely release one property because its security on everything else is more than enough.

Substitution of Sale Proceeds

Here the property is sold and the proceeds are held in a fund, typically an escrow account, that stands in the place of the property. The IRS’s lien and priority carry over to the fund exactly as they applied to the property.² This fits transactions where competing creditors need time to sort out who gets paid what.

Right of Substitution of Value (Third-Party Owners Only)

If you are not the person who owes the tax but a federal tax lien has attached to property you own, you can force the IRS to issue a discharge by depositing cash or posting a bond equal to the value of the government’s interest. The statute says the IRS “shall” issue the certificate, not “may.”² If the deposit exceeds what the government was actually owed, the IRS refunds the difference with interest. This provision does not apply if you are the taxpayer who created the debt.

Building the Form 14135 Package

The application itself is IRS Form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien.⁴ The form is short; the supporting documents are not. Incomplete packages are the single biggest reason applications stall, because the reviewer pauses the file and sends a request for additional information while your closing date keeps approaching.

A complete package generally includes:

The legal property description from the deed, with a copy of the deed itself.
A current independent appraisal or broker price opinion establishing fair market value. Residential appraisals typically run $575 to $1,300 depending on the property and location.
Payoff letters from every mortgage lender and copies of any state, local, or other liens recorded before the federal tax lien, to prove what debts have priority.
A signed purchase agreement showing the sale price and terms.
A draft settlement statement (preliminary Closing Disclosure, or HUD-1 for commercial transactions) showing how the sale proceeds will be distributed, including the specific dollar amount going to the IRS.

The proposed IRS payment on the settlement statement must match the government’s equity calculation: fair market value minus all senior liens. If the numbers don’t line up, the reviewer flags it immediately. Do not send a payment with the application. The final amount is confirmed in the conditional commitment letter the IRS issues if it approves the request.

Form 14135 does not require you to attach a Collection Information Statement (Form 433-A for individuals or 433-B for businesses), but the IRS may request one during the investigation, especially if a revenue officer is already assigned to your collection case. Having one prepared can save weeks if it’s asked for.

Where to Send It and How Long It Takes

Mail the completed Form 14135 and supporting documents to:

IRS Advisory Consolidated Receipts
7940 Kentucky Drive, Stop 2850F
Florence, KY 41042¹

IRS Publication 4235 lists 24 regional Collection Advisory Group offices. If a revenue officer is already handling your case, you may need to coordinate directly with that officer’s advisory group.⁵ Send the package by certified mail with return receipt so you have proof of the date the IRS received it.

The IRS asks you to submit at least 45 days before your scheduled closing.¹ That window is optimistic in practice. Anything missing or inconsistent triggers a request for more information that stops the clock. Cases involving an open revenue officer file or disputed lien priorities can take longer. Sixty to ninety days of lead time is a safer cushion.

If the IRS approves, it issues a conditional commitment letter (Letter 402 or Letter 403) before it issues the certificate itself.⁶ The letter sets the exact payment amount the IRS expects at closing and the conditions that must be met. Your title company, closing agent, or attorney needs that letter to proceed with the transaction.

After Approval: Closing, Form 669, and Recording

At closing, the title company or closing agent distributes the sale proceeds according to the settlement statement the IRS already reviewed. The IRS’s share is typically paid in certified funds. Once the Advisory Group confirms receipt and checks the final settlement documents against the preliminary numbers in your application, it executes the formal Certificate of Discharge on Form 669 and sends it to you.⁶

You are responsible for recording the certificate with the same local office where the original Notice of Federal Tax Lien was filed, usually the county recorder or registrar of deeds. Until it’s recorded, the public record still shows the lien on the property. Recording fees generally run $10 to $75. Don’t delay this step; the buyer’s title isn’t formally clear until the certificate appears in the record.

Remember what the discharge did and did not do. The lien is gone from the property named in the certificate. Your tax debt still exists, the federal lien remains attached to your other assets, and any existing payment plan continues. If you didn’t have one, collection continues on the remaining balance.

Selling to a Relative or Related Party

Selling to a family member, business partner, or related entity does not automatically disqualify you, but it draws closer scrutiny. The IRS defines fair market value as what a willing buyer and willing seller would agree to in an arm’s-length transaction, and a sale to your brother-in-law at a bargain price doesn’t meet that standard.⁶

In a non-arm’s-length transaction the IRS looks at three things: whether the price matches an independent appraisal, whether the government is receiving the full value of its interest, and whether you will truly give up all interest in and control of the property after the sale. A legitimate sale to a relative at an appraised price, where the IRS gets its equity and you walk away, can be approved. A sale where you plan to keep living in the house rent-free will not be.

If the IRS Denies the Application

A denial usually means the IRS disputes your valuation, believes the government’s interest is worth more than you offered, or sees a problem with the transaction structure. Start by contacting the Advisory Group reviewer to pin down the specific objection. A revised appraisal or an adjusted payment offer sometimes resolves the issue without a formal appeal.

If that doesn’t work, file a Collection Appeals Program (CAP) request on Form 9423. CAP specifically covers denials of lien certificates, including discharge requests.⁷ CAP appeals go to the IRS Independent Office of Appeals, separate from the collection division that denied the request.⁸ One limitation: a CAP decision is final within the IRS and cannot be taken to Tax Court.

If a denial or delay is creating serious financial harm, such as losing the sale and facing foreclosure, the Taxpayer Advocate Service at 877-777-4778 can intervene. TAS is not a formal appeal, but it can push back on unreasonable delays when a taxpayer faces significant economic hardship.⁷

When a Different Remedy Fits Better

Discharge is the right tool for selling one specific asset. Three other situations call for something else:

Refinancing a mortgage calls for a subordination, which moves the new lender into first position while the federal lien stays on the property behind it. Without subordination, no lender will fund the loan.
Repairing credit without selling anything calls for a withdrawal, which removes the public Notice of Federal Tax Lien. Under the Fresh Start program, you can request withdrawal if you’ve paid the debt in full and been in compliance for three years, or if you’re on a Direct Debit Installment Agreement for a balance of $25,000 or less with at least three consecutive payments made.⁹
Paying off the entire balance calls for a release. The IRS must issue it within 30 days, and it clears the lien from all your property at once.²

Whichever path you take, start early. Lien applications involve multiple IRS divisions, heavy document review, and closing deadlines that don’t bend. The taxpayers who run into trouble are almost always the ones who started six weeks before closing instead of two or three months out.

1
Internal Revenue Service. Publication 783 – How to Apply for a Certificate of Discharge From Federal Tax Lien
2
Office of the Law Revision Counsel. 26 USC 6325 – Release of Lien or Discharge of Property
3
Internal Revenue Service. Form 12277 – Application for Withdrawal of Filed Form 668(Y)
4
Internal Revenue Service. Form 14135 – Application for Certificate of Discharge of Property from Federal Tax Lien
5
Internal Revenue Service. Publication 4235 – Collection Advisory Group Addresses
6
Internal Revenue Service. Internal Revenue Manual 5.12.10 – Lien Related Certificates
7
Internal Revenue Service. Form 9423 – Collection Appeal Request
8
Internal Revenue Service. Publication 1660 – Collection Appeal Rights
9
Internal Revenue Service. Understanding a Federal Tax Lien