What IRS Form 14135 Is For
IRS Form 14135 is the Application for Certificate of Discharge of Property from Federal Tax Lien. The form enables taxpayers to request a discharge of property from an IRS tax lien when the lien attaches to real property, personal property, or business assets. The federal tax lien exists to protect the United States’ interest until the tax debt is satisfied, as outlined in Internal Revenue Code Section 6325(b).
This form applies when the IRS filed a lien, and a taxpayer must free one asset for a legal sale or refinance. The certificate of discharge allows completion of a purchase agreement or sales contract while maintaining federal tax liability. It removes the lien only from the specified property, keeping the remaining assets encumbered until full payment is made.
When You’d Use IRS Form 14135
Taxpayers file IRS Form 14135 when a federal tax lien attaches to property they plan to sell, transfer, or refinance. The lien restricts transactions until the Internal Revenue Service approves a discharge that protects the government’s interest in remaining assets.
Common Filing Situations
This form applies when selling real or business property under lien, transferring ownership through an estate, or selling personal property with an IRS claim. It also applies when clearing title after a recorded Notice of Federal Tax Lien or completing a short sale involving other creditors. The IRS advises submitting the form at least forty-five days before the proposed closing statement date.
Key Rules or Details for IRS Form 14135
Several legal standards govern the Internal Revenue Service's evaluation of an application for lien discharge. Each rule under Internal Revenue Code Section 6325(b) determines whether the property qualifies for release and how the government’s interest will be protected. These requirements ensure that both the taxpayer and the federal government remain compliant during property transfers.
- Double Value Remaining: The taxpayer’s remaining property must have a fair market value equal to twice the federal tax liability secured.
- Part Payment: The taxpayer pays the IRS its interest in the property, which is calculated as the difference between the proposed sales price and senior debts.
- No Value or No Equity: The IRS determines that its lien has no value when senior liens exceed the property’s worth.
- Escrow Agreement: The sale proceeds may be placed into an escrow account to maintain lien priority.
- Acceptable Bond Provided by a Third Party: A third party, not the taxpayer, may provide an acceptable bond equal to the lien amount.
Step-by-Step: How to Complete IRS Form 14135
Filing IRS Form 14135 involves a structured process that ensures compliance with federal tax requirements. Each step verifies that the Internal Revenue Service can adequately assess the property’s fair market value and confirm the government’s interest. Careful preparation helps taxpayers avoid delays and ensures accurate submission.
- Step 1: The taxpayer must identify the correct discharge rule under Internal Revenue Code Section 6325(b) that fits the property type and situation.
- Step 2: The taxpayer gathers required documents, including a title report, county valuation, sales contract, proposed closing statement, and two types of valuations.
- Step 3: The taxpayer submits the completed form and attachments to the IRS Advisory Group in Kentucky and responds promptly to additional requests.
- Step 4: Once approved, the taxpayer receives the official certificate of discharge that releases the property from the federal tax lien.
Common Mistakes and How to Avoid Them
Many taxpayers experience setbacks when submitting IRS Form 14135 due to preventable errors. Understanding these issues and how to correct them ensures compliance and prevents costly delays in obtaining a certificate of discharge. Careful planning and accurate documentation make a significant difference in the approval process.
- Late Filing: The taxpayer should submit all documents at least 45 days in advance to allow for a full review by the IRS Advisory Group.
- Incomplete Documentation: The taxpayer must include the title report and sales contract to prevent rejection and confirm that all required attachments are included.
- Incorrect Valuation: The taxpayer must provide both a fair market appraisal and an informal county valuation to ensure accurate review.
- Payment Errors: The taxpayer should wait for the IRS to issue a payment request outlining the government’s interest before sending funds.
- Noncompliance: The taxpayer must file all returns, update missed payments, and maintain consecutive direct debit payments to keep the application eligible for approval.
What Happens After You File IRS Form 14135
After you submit IRS Form 14135, the Internal Revenue Service assigns your application to an Advisory Group Manager for review. The typical review process lasts four to eight weeks, depending on the completeness of your submission and whether additional information is required. The agency evaluates all documents to verify accuracy and confirm the government’s interest in the property.
During review, the IRS verifies the lien amount, fair market value, and expected sale proceeds. The agency ensures that both the government and other creditors remain protected during the transaction. If the application meets federal standards, the IRS issues a Conditional Commitment Letter outlining required payments or documents. Once compliance is verified, a Certificate of Discharge is released under federal tax law. Applicants denied discharge may appeal using Form 9423 or request a tax lien withdrawal after paying the debt in full.
Frequently Asked Questions
What is IRS Form 14135 used for?
IRS Form 14135 is the official tax form for requesting a Certificate of Discharge from a federal tax lien. It allows a taxpayer to release specific property—such as real property, business property, or financial assets—from an IRS lien without eliminating the total tax liability. This process is governed under Internal Revenue Code Section 6325(b).
Does a lien discharge remove my entire federal tax liability?
A lien discharge through IRS Form 14135 removes the IRS’s claim from specific property only. The federal tax lien remains in effect until the underlying federal tax liability secured by the lien is fully satisfied. Other taxpayer property remains encumbered until the total tax debt is resolved.
What happens after I submit IRS Form 14135?
Once the IRS receives the application, it verifies lien amounts, fair market value, and proposed sales price. The IRS may request a professional appraisal or informal valuation before issuing a Certificate of Discharge. If approved, the sale proceeds may be directed into an escrow account to protect the government’s interest.
Can I use an installment agreement instead of paying the full amount?
A qualifying taxpayer can request a direct debit installment agreement to make consecutive direct debit payments toward their tax debt. This approach must comply with federal tax deposit requirements and IRS payment standards. The agreement does not replace lien discharge but supports overall tax compliance.
What if I experience economic hardship during the lien discharge process?
If a taxpayer faces economic hardship, the IRS may evaluate options under federal law. This could include revising the payment schedule, accepting a reduced proposed selling price, or reviewing eligibility for tax lien withdrawal. Each decision depends on the IRS’s position regarding the taxpayer’s financial circumstances and compliance record.
