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Lien Discharge vs. Lien Subordination

Two certificates, two forms, and one difference: whether the lien comes off the property or stays on it and moves down the queue.

Quick Answer

Discharge takes the lien off one asset. Subordination leaves it on and moves the IRS down the queue against it. The forms are near-identical in structure — both built around a transaction rather than around the taxpayer, both with an applicant field separate from the taxpayer field, because the person who needs the certificate is usually a buyer, a lender or a title company. Which one a transaction needs follows from the transaction: a sale generally needs the lien off the property, a refinance generally needs the new lender ahead of it. Applying for the wrong one costs the time the transaction does not have. Publication 783 and Publication 784 are the IRS instruction booklets, one for each.

1

Discharge (Form 14135)

Advantages

  • It removes the lien from a specific piece of property. The IRS describes a discharge as removing the lien from specific property.
  • It is what a sale usually needs, because a buyer will not take title with a lien attached.
  • The applicant does not have to be the taxpayer. The form has a relationship-to-taxpayer field for exactly that.
  • A denial is appealable — the instructions to Form 9423 list denials of lien certificate requests among the actions CAP reaches.

Disadvantages

  • It reaches one asset. The lien stays on everything else.
  • The IRS states several Internal Revenue Code provisions determine eligibility, and points to Publication 783 for how to prepare the application.
  • The form states additional information may be requested of you or a third party to clarify the details of the transaction.

Best For

What it does: takes the lien off one specific piece of property.

Typical Cost

No fee is published on either form for making the application.

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2

Subordination (Form 14134)

Advantages

  • It changes priority rather than attachment. The IRS states subordination "does not remove the lien but allows other creditors to move ahead of the IRS, which may make it easier to get a loan".
  • It is what a refinance usually needs, because the new lender wants first position rather than clear title.
  • Same applicant structure as discharge — the form has a relationship field, because the applicant is frequently a lender.
  • A denial is appealable under the Collection Appeals Program.

Disadvantages

  • The lien remains on the property. Nothing is released.
  • The IRS points to Publication 784 for how to prepare the application.
  • The form states additional information may be requested to clarify the details of the transactions.

Best For

What it does: leaves the lien in place and lets another creditor take a position ahead of it.

Typical Cost

No fee is published on either form for making the application.

The Verdict

Discharge takes the lien off one asset. Subordination leaves it on and moves the IRS down the queue against it. The forms are near-identical in structure — both built around a transaction rather than around the taxpayer, both with an applicant field separate from the taxpayer field, because the person who needs the certificate is usually a buyer, a lender or a title company. Which one a transaction needs follows from the transaction: a sale generally needs the lien off the property, a refinance generally needs the new lender ahead of it. Applying for the wrong one costs the time the transaction does not have. Publication 783 and Publication 784 are the IRS instruction booklets, one for each.

Frequently Asked Questions

Does either of them mean I stop owing the tax?
No. Neither certificate touches the liability. A discharge removes the lien from one property; a subordination changes priority against it. The debt and the lien both remain.
Can someone other than the taxpayer apply?
Both forms are structured for it. Each asks separately for the taxpayer as named on the notice of lien and for the applicant, with a checkbox for whether the applicant is also the taxpayer and a field for their relationship to the taxpayer.
What if the IRS says no?
The instructions to Form 9423 list "denials of requests to issue lien certificates, such as subordination, withdrawal, discharge or non-attachment" among the actions appealable under the Collection Appeals Program.
How long does it take?
Neither form nor this page states a processing time. Publications 783 and 784 are the IRS instructions and were not read in full for this page. Start earlier than you think you need to.

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Sources

Sourced to primary IRS materials and editorially reviewed. Not reviewed by a tax professional. Not tax advice. Report a correction.