The IRS can seize your home for unpaid taxes. Luckily, the IRS uses home seizures as a last resort. The agency always explores other collection options before taking this measure.
However, if you have unpaid IRS taxes, you need to be aware of the possibility of losing your home. If the IRS has sent you a notice telling you that it intends to levy your home, you need to get help immediately. The tax attorneys at The W Tax Group are experienced in helping taxpayers avoid IRS seizures of their homes and other property.
Don’t wait. Protect your home and your other assets by getting help as soon as possible. For assistance with back taxes, contact us at The W Tax Group today.
When Can the IRS Seize Your Personal Residence?
There are strict rules about seizing people’s homes for unpaid taxes. The IRS can only seize your home if you owe more than $5,000. Additionally, the agency must follow the correct legal processes in order to seize your home.
Note that there is a difference between seizing homes that you use as a residence and homes that you rent to other people. If you have a rental home, the IRS doesn’t have to follow the same protocol that it does for personal residences.
How Does the IRS Notify You Before Taking Your Home?
The IRS will not simply show up and start auctioning off your home. The agency will send you several notices before seizing your home. Once you receive the Final Notice of Intent to Levy and Notice of Your Right to a Hearing, you have 30 days to respond. If you don’t make arrangements to pay your tax liability or appeal within this time frame, the IRS can move forward with seizing your home.
There are a couple of situations where the IRS can seize your home without giving you 30 days’ notice. In particular, if the tax collection is in jeopardy, the IRS doesn’t have to follow the 30-day rule. Jeopardy means that the IRS believes it may not be able to collect the taxes unless it takes action quickly.
The 30-day rule also doesn’t apply in the case of Disqualified Employment Tax Levies (DETL). A DETL is when you owe employment taxes and you’ve requested a Collection Due Process hearing on the same type of taxes in the last two years.
What Processes Does the IRS Use to Seize Homes?
The IRS can use two different processes to seize your home for unpaid taxes. The first option is to obtain court approval for home seizure under the terms of U.S. Code 6334(e)(1). The IRS only uses this option very rarely.
Generally, if the IRS takes your home for unpaid taxes, it uses the foreclosure process. To foreclose on your home, the IRS must issue a federal tax lien against your property. Then, it can foreclose against the lien by filing a foreclosure lawsuit.
What Is the Minimum Bid Price in a Home Seizure?
If the IRS decides to seize your home, the agency will show you the minimum bid price. This is the minimum amount that the IRS will accept when auctioning off your home. You have the right to dispute the minimum bid price. If you disagree with the IRS’s number, you should bring forward information that establishes the fair market value of your home.
The minimum bid price prevents the IRS from selling your home for less than it’s worth. To explain, imagine that your home’s fair market value is $200,000, but the IRS auctions off the home for $20,000. This covers your tax liability, but it is not fair to you because the home was sold for so much less than its value. This is an extreme example, but it shows you the importance of having a reasonable minimum bid price.
What Happens When the IRS Seizes Your Home?
Once the minimum bid price is established, the IRS will publish a public notice about your home’s sale. The notice usually goes in local papers, but the IRS can also use flyers. The IRS can auction off your home 10 days after posting the public notice.
After the IRS auctions off the home, it will use the sales proceeds to cover the tax bill plus the cost of seizing your home. If there is any money left, the IRS will refund that to you.
Can I Get the IRS to Release the Levy on My Home?
The IRS must release a levy (seizure) on your home or any other property in the following situations:
- You’ve paid the tax bill in full.
- You’ve set up an installment agreement to make monthly payments on your tax liability, and its terms allow the levy to be released.
- The Collection Statute Expiration Date (CSED) occurred before the IRS started to seize your home. Once the CSED passes, the IRS can no longer collect on the debt. This usually occurs 10 years after the return was filed or the tax was due.
- The personal residence levy causes financial hardship. In other words, seizing your home would make it impossible for you to pay for basic living expenses.
- The IRS can collect the tax liability without seizing your home.
- The home was exempt from seizure. For instance, if the IRS levies a home when you owe less than $5,000, it is exempt from seizure.
- The IRS didn’t follow the correct protocol when seizing your home. For instance, if the IRS didn’t send the Final Notice of Intent to Levy and Notice of Your Right to a Hearing, the agency didn’t follow the right procedures.
- You have requested an Installment Agreement, Innocent Spouse Relief, or an Offer in Compromise. The IRS must stop all levies while these requests are being processed. The IRS will also release the levy if the agency accepts your request for an Installment Agreement, Offer in Compromise, or Innocent Spouse Relief.
- You have appealed the home levy, and your Collection Due Process (CDP) case is pending.
- Releasing the levy on your home is in the best interest of both you and the government.
The IRS must release the levy against your personal residence if any of these situations apply. However, in most cases, unless you pay the tax bill in full or apply for an IRS program such as an Installment Agreement, the IRS will not automatically release the levy. To get the levy on your home released, you must contact the IRS and explain why the levy should be released.
What Can I Do If the IRS Rejects My Request for a Levy Release on My Home?
If the IRS rejects your levy release request, you can appeal. Generally, you can appeal through the Collection Appeals Program or by requesting a Collection Due Process hearing. To use the Collection Appeals Program, ask to speak with the manager of the agent who issued the levy against your home. If you want to request a CDP hearing, you must do so within 30 days of receiving the Final Notice of Intent to Levy and Notice of Your Right to a Hearing.
Can I Get My Home Back If the IRS Takes It?
If the IRS seizes your home and sells it, you have 180 days to buy it back. You must pay the purchaser’s price plus 20% annual interest compounded daily.
What Should I Do If the IRS Takes My Home for Another Party’s Tax Liability?
Obviously, the IRS does not have the right to seize your home to cover someone else’s tax bill. However, if this happens, you can appeal under the Collection Appeals Program. You can also file a claim based on the rules outlined in Section 6343(b) of the Internal Revenue Code. Or you can file a lawsuit based on section 7426 of the tax code.
If the IRS wrongfully seizes your home or any other property, you can sue the government for damages. You should get a tax attorney to help you. This can be a complicated process. However, there are cases where the IRS can seize jointly owned homes even if only one owner is liable for the tax — if this happens, the IRS must usually compensate you for your portion of the home’s value after the sale.
Does the IRS Seize Homes Very Often?
Home seizures for unpaid taxes are very rare. In fact, IRS property seizures are relatively rare. The most common IRS levies are wage garnishments, tax refund levies, and bank account seizures. In 2021, the IRS issued over 300,000 of these types of levies.
However, the agency seized property 96 times. The IRS only publishes the total number of property seizures. It doesn’t specify which of these 96 property seizures were for personal residences.
It’s also important to note that levies were relatively low during 2021 due to the suspension of collection actions during the COVID pandemic. In 2017, the IRS issued close to 600,000 levies against wages, bank accounts, and the like, and it seized property 323 times.
Can the IRS Use My Home to Cover My Tax Liability Without Seizing It?
Although home seizures are relatively rare, the IRS can use your home to cover your unpaid taxes in other ways. In particular, if the IRS issues a federal tax lien against you, it will attach to all of your property for 10 years. If you sell or refinance your home while the lien is active, the IRS has the right to claim the proceeds.
There is a very high likelihood of this happening. The IRS issues federal tax liens against most people who have unpaid taxes.
How Does My Home’s Value Affect My Tax Resolution Options?
Even if the IRS doesn’t seize your home, the value of your home can affect your tax resolution options. For example, if you apply for hardship status, the IRS may reject your application if you have a lot of equity in your home. Similarly, when you apply to settle your tax liability through an offer in compromise, the IRS will take your home’s equity into account when reviewing your offer.
Can the IRS Take My Home for Unpaid Taxes If I Own the Home With Another Party?
Yes, in many cases, the IRS can take your home even if you own it jointly with another person. However, the exact rules vary based on the situation and the laws in your state.
Generally, if you own the home in joint tenancy, tenancy in common, and tenancy by entirety, the IRS can seize the home, but it must compensate the other joint owners after the sale. If you own the home with your spouse in a community property state, the laws vary based on the state.
What Happens If I Have a Mortgage and the IRS Tries to Take My Home?
The IRS can seize mortgaged homes. If this happens, the IRS pays off your mortgage with the proceeds of the sale. Then, it applies the remaining amount to your tax liability.
Get Help Now — Don’t Let the IRS Seize Your Home or Other Assets
You don’t want the IRS to seize your home. Home seizures can be personally and financially devastating. Regardless of where you are in the collection process, you should get help today. The experienced tax attorneys employed at The W Tax Group can stop the IRS from seizing your home and help you find a resolution option for your back taxes. To learn more, contact us today.