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Published:   |   Last Updated: October 12, 2023

Applying for a Certificate of Subordination of the Federal Tax

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Station Overview

The Notice of Federal Tax Lien (NFTL) can stop or delay refinancing of home mortgages, other loans, or third-party collection of business accounts receivable. 

Applying for a Certificate of Subordination of the NFTL can move a bank’s claim to property ahead of the IRS’s claim. 

This notice or letter may include additional topics that have not yet been covered here. Please check back frequently for updates.

What does this mean to me?

The IRS has filed a NFTL for unpaid tax balances. 

Paying the tax balance in full can stop other collection actions. 

The NFTL is a public record that can affect you and your property and assets. 

How did I get here?

When you don’t pay your taxes, the IRS can file a public document with the local and/or state authorities.  

When the NFTL is filed, it alerts banks and financial companies that you owe the government. 

The NFTL secures the priority of the government’s claim to your current and future property and assets until the balance is paid in full. 

What are my next steps?

When a NFTL is filed because you owe taxes, then you must decide if a certificate of subordination is right for your situation. 

Does my loan qualify as a Purchase Money Mortgage (PMM) or Purchase Money Security Interest (PMSI)? 

Subordination isn’t needed if you are buying real property (like a home) or personal property (like a boat), because your loan can qualify as PMM or PMSI. 

 To qualify: 

  •  The loan must meet local laws. 
  • The newly purchased property guarantees the loan. If the loan doesn’t get paid, then the bank can claim the property. 

The bank loan moves ahead of the governments claim to the property when the purchase price equals the loan amount. 

See Publication 785, Purchase Money Mortgages, Purchase Money Security Interests, and Subordination of the Federal Tax Lien for more information. 

 Does my loan qualify as Equitable Subrogation? 

Subordination isn’t needed when state law allows one person in place of another. This is called equitable subrogation. This can happen when a bank pays off a loan that was ahead of the NFTL and the new loan takes the old loan’s place in order to protect the bank’s claim on the property. This can include refinancing a mortgage. 

  •  A Certificate of Subordination may be needed, if the bank wants the Certificate of Subordination recorded in public records to protect their claim on the property. 

Certificate of Subordination 

If your situation doesn’t meet PMM, PMSI, or equitable subrogation, then you may qualify under one of the criteria for subordination. 

 Criteria for Subordination 

  •  IRS is paid an amount equal to the amount shown on the NFTL. 
  • The value of the property is equal to, or more than the amount shown on the NFTL. 
  • The IRS will be able to collect the amount shown on the NFTL after the subordination. 

 The IRS doesn’t have to issue a certificate of subordination, but it can when it is in the best interest of the government. 

 Do I need to apply for a certificate of subordination if a third-party collects my business accounts receivable? 

 When a third-party collects a business’ accounts receivable, it is called a factoring agreement. The third-party steps into the shoes of the business to collect money owed to the business. The third-party collects the money owed to the business and takes a portion as a fee and pays the remaining amount to the IRS. 

 To subordinate a factoring agreement: 

  •  The third party must apply for a certificate of subordination of the NFTL. 
  • An installment agreement must be requested along with the application for subordination. See Form 433-D, Installment Agreement 
  • This certificate of subordination has a time limit. 
    • It can be no longer than 1-year for an out-of-business taxpayer and  
    • no longer than 90 calendar days for an in-business taxpayer. 
  • A new application for subordination must be submitted when the subordination time limit has ended. 

To apply for a certificate of subordination, submitForm 14134, Application for Certificate of Subordination of Federal Tax Lien. See Publication 784, How to Apply for a Certificate of Subordination of Federal Tax Lienand Publication 785 for more information. 

The IRS will notify you by letter if your application was accepted or denied. 

If your application is denied, you can request a conference with the IRS Independent Office of Appeals using a Form 9423, Collection Appeal Request. See Publication 1660, Collection Appeal Rights, for full explanation of the Collection Appeal Program. 

There are other types of lien relief the IRS offers. See Lien Relief for more options.

Where can I get additional help?

Get Help topics

Browse common tax issues and situations at Get Help on the Taxpayer Advocate Service website.

If you still need help

The Taxpayer Advocate Service is an independent organization within the IRS that helps taxpayers and protects taxpayers’ rights. We can offer you help if your tax problem is causing a financial difficulty, you’ve tried and been unable to resolve your issue with the IRS, or you believe an IRS system, process, or procedure just isn’t working as it should. If you qualify for our assistance, which is always free, we will do everything possible to help you.

Visit www.taxpayeradvocate.irs.gov or call 1-877-777-4778.

Low Income Taxpayer Clinics (LITCs) are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level and who need to resolve tax problems with the IRS. LITCs can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. In addition, LITCs can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Services are offered for free or a small fee. For more information or to find an LITC near you, see the LITC page on the TAS website or Publication 4134, Low Income Taxpayer Clinic List.

Related Letters & Forms

  • Form 668 (Y)(C), Notice of Federal Tax Lien
  • Form 668 (D), Certificate of Subordination of Federal Tax Lien 
  • Form 14134, Application for Certificate of Subordination of Federal Tax Lien