If you owe the IRS a lot of money, you may have one frightening question: Can the IRS actually take my house? The answer is yes, the IRS can take your home or other property.. But it is rare. The IRS cannot simply show up and take your home. In a serious case, the government can file a lawsuit in federal court and ask the court to allow the property to be sold to pay the tax debt

The IRS has powerful collection tools. It can file a federal tax lien, levy bank accounts and wages, seize certain property, and, in serious cases, seek the forced sale of real estate. But taking someone’s primary home is generally not the IRS’s first choice. There are additional procedures and approvals involved, and there may be opportunities to resolve the tax debt before things reach that point.

At Tomes Law Firm, we help New Jersey taxpayers deal with serious IRS collection problems. Our team looks at the tax debt, the taxpayer’s income and assets, the IRS collection history, and the available resolution options. The most important thing to understand is this: Do not ignore IRS collection notices because you assume the IRS will never take your home.

We have seen what can happen when a taxpayer waits too long.

Can the IRS Really Force the Sale of My House?

Yes. Federal law allows the government to bring a lawsuit in the United States District Court to enforce a federal tax lien and subject property in which the taxpayer has an interest to payment of the tax debt.

There are also special protections for a taxpayer’s principal residence. The IRS generally cannot simply seize your primary residence the same way it might levy a bank account. Judicial approval is required for an administrative seizure of a principal residence.

That protection does not mean your home can never be sold to satisfy an IRS debt. The government can also file a federal court action to foreclose its tax lien against property.

Seb Learned This the Hard Way

One of our clients, Seb, owed substantial taxes to the IRS.

Seb received notices. He ignored them. More notices came. He ignored those too. Eventually, the problem did not disappear. It became much more serious.

The United States filed a lawsuit against Seb in U.S. District Court seeking a forced sale of his property to satisfy the federal tax debt. At that point, Seb was not dealing with another collection letter. He was dealing with a federal lawsuit and the possibility of losing his property. Fortunately, he came to us. We were able to work through the case and reach a resolution that avoided the result he feared.

Seb did not lose his property, but by waiting until the government filed suit, he gave himself fewer choices and made the problem far more serious than it needed to be. The best time to deal with an IRS collection problem is before the government files a lawsuit and before they try to seize your property.

What Is the Difference Between a Federal Tax Lien and an IRS Seizure?

A federal tax lien is the government’s legal claim against your property when you have unpaid federal taxes. A levy or seizure is different. A levy actually takes property to satisfy the debt.

That means having a federal tax lien does not necessarily mean the IRS is about to take your house. But you should not ignore the lien either.

A federal tax lien can create problems when you want to sell or refinance your home. If there is equity in the property, some or all of the lien may normally be paid from the proceeds when the property is sold. There are also procedures that may permit a discharge or subordination of the lien in appropriate circumstances.

What Does the IRS Look At Before Trying to Take Your Home?

The IRS generally does not jump from an unpaid tax bill to taking someone’s home.

Before pursuing a principal residence, the IRS must consider whether there are reasonable alternatives for collecting the debt. That may include looking at your income, bank accounts, other assets, equity in the property, ability to make payments, and whether the proposed action would create a serious hardship.

That is another reason to deal with the problem early. If you work with the IRS while other resolution options are still available, you may be able to prevent the case from reaching the point where your home is at risk.

Does the IRS Usually Take People’s Homes?

No.

Taking someone’s principal residence is a serious collection action with additional procedural safeguards. But rare does not mean impossible.

That is exactly why taxpayers should not assume, “The IRS would never actually take my house.”

Sometimes the better question is: What can I do now so the case never gets that far?

What If My Spouse Owns the Home With Me or I Have a Mortgage?

Having a mortgage or owning property with another person does not automatically prevent IRS collection.

The IRS’s rights depend on the taxpayer’s legal interest in the property, the other liens against it, and the facts of the case. Mortgage companies, spouses, and other people with an interest in the property may become part of a federal foreclosure proceeding.

These cases can become legally complicated very quickly. If the IRS or Department of Justice is talking about your real estate, that is the time to get legal advice rather than trying to sort it out after a lawsuit has already been filed.

Can I Sell or Refinance My House If There Is an IRS Tax Lien?

Possibly. A federal tax lien can make a sale or refinance more complicated, but it does not always make it impossible.

If there is enough equity in the property, the IRS lien may be paid from the proceeds at closing. In some cases, the IRS may agree to discharge the property from the lien so a sale can go forward. The IRS may also agree to subordinate its lien to another lender when doing so helps facilitate refinancing and improves the government’s ability to collect.

This is often much better to address voluntarily than waiting until the government starts talking about a forced sale.

What Other Property Can the IRS Take?

The IRS’s collection authority extends well beyond houses. Depending on the circumstances, the IRS may potentially levy or seize property or rights to property belonging to the taxpayer unless the law specifically exempts that property.

• Bank accounts
• Investment accounts
• Vehicles
• Real estate other than your primary home
• Certain business assets
• Valuable personal property
• Money owed to you by someone else

Some property is protected by federal law, and additional restrictions apply to certain property, including principal residences and some property used in a taxpayer’s trade or business. What the IRS can actually take in a particular case depends on the facts.

What Happens If the IRS Seizes Property?

If the IRS legally seizes property and proceeds with a sale, the IRS generally sells the taxpayer’s interest in that property and applies the proceeds toward the costs of the seizure and sale and then the outstanding tax debt.

There are procedures governing the sale, including notice requirements and calculation of a minimum bid price. This is another reason taxpayers should try to resolve their collection problem before property reaches the seizure-and-sale stage.

Will the IRS Warn Me Before Taking Property?

Usually, yes. Before issuing most levies, the IRS generally must assess the tax, send a Notice and Demand for Payment, and provide a Final Notice of Intent to Levy and notice of the taxpayer’s right to a hearing at least 30 days before the levy.

Those notices matter.

One of the biggest mistakes I see taxpayers make is putting IRS mail aside because they are afraid to open it. Ignoring an IRS letter does not stop the collection process. Sometimes it eliminates opportunities you would have had if you had responded earlier.

Seb’s case is a perfect example.

Can I Stop the IRS Before It Gets to a Forced Sale?

Possibly.

The options depend on your financial circumstances, the amount and age of the tax debt, the equity in your property, your compliance with current tax obligations, and where the IRS is in the collection process.

• Paying the liability
• Establishing an installment agreement
• Submitting an Offer in Compromise
• Seeking Currently Not Collectible status when appropriate
• Challenging an incorrect liability
• Exercising available Collection Due Process rights
• Negotiating with the IRS before more aggressive enforcement occurs
• Addressing a federal tax lien so property can be sold or refinanced

There is no single solution that works for everyone. That is why we start by figuring out where the case is right now and what the IRS can legally do next.

What Should I Do If the IRS Is Threatening My Home?

Do not ignore the notice.

Gather every IRS letter you have received, particularly the most recent ones. Pay attention to deadlines. If a Revenue Officer has been assigned, do not assume the problem will disappear if you stop answering calls.

If you have received documents from the U.S. Department of Justice or a United States District Court, the matter has reached a much more serious stage. Get legal advice immediately.

Seb came to us after the government had already filed its federal lawsuit. We were able to help him. But I would much rather meet the next Seb before the lawsuit gets filed.

We Help New Jersey Taxpayers Deal With Serious IRS Collection Problems

At Tomes Law Firm, we help individuals and business owners throughout New Jersey resolve IRS and New Jersey tax problems.

If you owe the IRS and are worried about your house, real estate, bank accounts, retirement funds, business assets, or other property, waiting usually does not make the problem easier.

The IRS may have powerful collection tools, but taxpayers have rights and potential resolution options too.

The earlier we look at the problem, the more opportunity we may have to find a solution before the IRS takes more aggressive collection action. Call us today at 732-333-0681 or 833-4IRS-TAX to schedule your confidential free consultation to discuss your back tax matter.

Tomes Law Firm – We Solve Tax Problems. You Get Peace of Mind.