Does the IRS ever allow another debt to take priority over the IRS’s lien?
Yes. A lien subordination is the IRS’s agreement to permit another lien (e.g., mortgage or other security interest) to take priority over the IRS’s lien. The IRS simply agrees to allow another debt secured by the taxpayer’s property to be paid before the tax covered by the IRS’s lien when, otherwise, the IRS would have a legal right to collect the tax covered by its lien first. The typical situation for lien subordination is the purchase of a home when the IRS has already filed a lien against the taxpayer. A lender is not likely to provide the taxpayer a mortgage loan unless the lender’s security for the loan (e.g., mortgage or deed of trust) has priority over the tax lien. Generally, the IRS may agree to subordinate its lien if subordination is likely to increase the amount that the United States will be able to collect or if the collection of the tax liability will be easier.
