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

To get a tax lien discharge, you file IRS Form 14135 with the Collection Advisory Group and prove that you qualify under one of five grounds in 26 USC 6325, showing the government will receive fair value for lifting its claim on the specific property.¹ The discharge removes the federal tax lien from one asset — usually a house you’re trying to sell — while leaving it attached to everything else you own until the underlying tax debt is resolved.

What a Discharge Actually Does

A federal tax lien attaches to all of your property. It does not disappear when you sell. If you transfer a house without a discharge, the lien follows the property to the new owner, and virtually no title company will insure the transaction. As a practical matter, the sale won’t close.

A Certificate of Discharge fixes that for one property. It clears the lien from the specific parcel named in the certificate so title can pass cleanly to a buyer. It does not reduce your tax debt except by whatever payment the IRS receives from the sale proceeds, and it does not lift the lien from your other assets.

Three related remedies solve different problems and use different forms. A release wipes out the lien entirely and only applies once the full balance is paid or the 10-year collection statute expires.² A subordination is the tool for refinancing, moving a new lender ahead of the IRS without removing the lien. A withdrawal removes the public Notice of Federal Tax Lien to help your credit but leaves the underlying lien in place, and it uses Form 12277 rather than Form 14135.³ If you’re selling one property, discharge is the right tool.

The Five Grounds — Pick the One That Fits

You only need to qualify under one of the five statutory bases in 26 USC 6325(b).² Identifying the right one before you draft the application drives what documentation you’ll need and what number goes on the settlement statement.

Part Payment of the Government’s Interest

This is the usual ground when you’re selling with some equity. You pay the IRS at least the value of its interest in the property, which is the fair market value minus all senior liens (typically an existing mortgage recorded before the tax lien). If your home is worth $400,000 and the first mortgage is $350,000, the government’s interest is $50,000, and the IRS will expect at least that much from the closing proceeds.¹ The payment doesn’t have to satisfy the full tax debt.

No Value to the Government

When senior debts already exceed fair market value, there is no equity for the IRS to collect. A home worth $300,000 with a $320,000 senior mortgage is the classic case. The IRS can discharge the lien because forcing a sale would produce nothing for the government. The IRS generally expects you to give up all interest in the property once the transaction closes.

Double-Value Test

You can get a discharge with no payment at all if your other property still subject to the lien is worth at least twice the sum of your unpaid tax debt plus any liens on that other property that outrank the federal lien. This is a high bar; most taxpayers in collection don’t have that much unencumbered surplus. When you do, the IRS’s security cushion on your remaining assets justifies letting one property go.

Substitution of Sale Proceeds

The property sells and the proceeds sit in an escrow fund that stands in place of the property. The federal lien and its priority carry over to the fund unchanged. This route helps when competing creditors need time to sort out who gets paid.

Right of Substitution of Value — Third-Party Owners Only

If you did not create the tax debt but your property has been reached by someone else’s federal tax lien, you can force a discharge by depositing cash or posting a bond equal to the government’s interest. The statute uses “shall” — the IRS must issue the certificate. If the deposit exceeds what was actually owed, the IRS refunds the difference with interest. This provision is not available to the taxpayer who owes the debt.

Building the Form 14135 Package

Form 14135 is short, but the supporting documentation is not.⁴ Incomplete packages are the leading reason applications stall, because the reviewer pauses everything and sends a request for additional information.

The legal description from the deed, plus a copy of the deed.
An independent professional appraisal or broker price opinion establishing fair market value. Residential appraisals generally run $575 to $1,300 depending on the property and location. The IRS leans heavily on this number to calculate its interest.
Payoff letters from every mortgage lender and copies of any state, local, or other liens recorded before the federal tax lien. These establish what has priority over the IRS.
The signed purchase agreement showing price and terms.
A draft settlement statement (preliminary Closing Disclosure, or HUD-1 for commercial transactions) showing exactly how proceeds will be distributed, including the specific dollar amount going to the IRS.

The proposed payment to the IRS on the settlement statement must equal fair market value minus senior liens. If those numbers don’t reconcile, the reviewer will flag it immediately. Don’t send payment with the application. The final amount is set by the conditional commitment letter the IRS issues on approval.

Form 14135 itself doesn’t require a Collection Information Statement, but the reviewer can request one during the investigation, especially in complex cases or where a revenue officer is already assigned. Having Form 433-A (individuals) or Form 433-B (businesses) prepared and ready can save weeks.

Selling to a Family Member or Related Party

A sale to a relative, business partner, or related entity is not automatically disqualifying, but it draws closer scrutiny. Fair market value means what a willing buyer and willing seller would agree to at arm’s length, so a suspiciously low price to your brother-in-law will not clear review.⁵ The IRS looks at three things: whether the price is fair market value supported by an independent appraisal, whether the government receives the full value of its interest, and whether you actually give up all interest and control after the sale. Selling to a relative and staying in the house rent-free is the pattern that produces denials. A legitimate related-party sale at appraised value, where the IRS gets its equity and you walk away, can be approved.

Where to Send It and How Long It Takes

Mail the completed Form 14135 and all supporting documents to:

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

Publication 4235 lists the 24 regional Collection Advisory Group offices. If a revenue officer is already assigned to your case, coordinate through that officer’s advisory group.⁶ Send by certified mail with return receipt so you can document when the IRS received the package.

The IRS asks for submission at least 45 days before closing.¹ In practice, 45 days is optimistic. Any gap in the package triggers a request for information that pauses the review. Files involving an open revenue officer case or contested lien priority run longer. Sixty to ninety days of lead time is a safer cushion.

What Happens After Approval

The IRS’s approval does not arrive as the discharge certificate itself. It arrives as a conditional commitment letter (internally, Letter 402 or Letter 403) that specifies the exact payment the government expects at closing and the conditions attached.⁵ That letter is what the closing agent, title company, or attorney needs to move forward.

At closing, proceeds are distributed per the settlement statement the IRS already reviewed, with the IRS’s share typically paid in certified funds. Once the Advisory Group confirms receipt and compares the final settlement documents to the preliminary numbers, it executes the formal Certificate of Discharge on Form 669 and sends it to you.

You then record the certificate with the same local recording 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. Recording fees generally run $10 to $75. The buyer’s title is not formally clear until the certificate appears in the record.

Your remaining tax debt does not go away. The federal lien remains attached to your other assets. If you had a payment plan, it continues. If you didn’t, collection continues on the balance.

If the IRS Denies Your Application

Denials usually trace to a valuation dispute, a belief that the government’s interest is worth more than you’ve offered, or a problem with how the transaction is structured. Start by contacting the Advisory Group reviewer to identify the specific objection. A revised appraisal or an adjusted payment offer often resolves things without an appeal.

If that doesn’t work, file a Collection Appeals Program request on Form 9423. CAP specifically covers denials of lien certificates, including discharge requests.⁷ The appeal goes to the IRS Independent Office of Appeals, separate from the collection division that issued the denial.⁸ One limitation: CAP decisions are final within the IRS. You cannot take a CAP decision to Tax Court.

If the denial is producing serious financial harm, such as an imminent lost sale followed by foreclosure, the Taxpayer Advocate Service at 877-777-4778 can intervene. TAS is not a formal appeal, but it can expedite processing and push back on unreasonable delays for taxpayers facing significant economic harm.⁷

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. Internal Revenue Manual 5.12.10 – Lien Related Certificates
6
Internal Revenue Service. Publication 4235 – Collection Advisory Group Addresses
7
Internal Revenue Service. Form 9423 – Collection Appeal Request
8
Internal Revenue Service. Publication 1660 – Collection Appeal Rights