Can the IRS Take Your Home if You Owe Back Taxes?
The IRS has legal authority to seize your home for back taxes, but they rarely do so. Before taking your property, they must follow strict procedures and exhaust other collection methods. You can stop home seizure by requesting a hearing, setting up a payment plan, or filing bankruptcy to trigger an automatic stay.
Get Free ConsultationThe IRS can legally take your home if you owe back taxes. But home seizures are extremely rare and happen only as a last resort.
Before moving to seize your property, the IRS will exhaust other collection methods first. These include wage garnishments, bank levies, and tax refund offsets.
Stop IRS Home Seizure With Bankruptcy Protection
Filing bankruptcy triggers an automatic stay that immediately stops the IRS from seizing your home. Chapter 7 can discharge older tax debts while Chapter 13 lets you catch up on payments. Get a free consultation to see if you qualify.
Check Bankruptcy OptionsIf the IRS does pursue your home, they must follow strict legal procedures. You’ll receive multiple notices and have opportunities to stop the seizure.
You have more power than you might think. Understanding your rights can help you protect your home and resolve your tax debt.
Can the IRS Actually Seize Your Home?
Yes, the IRS has legal authority to seize your home for unpaid taxes. However, this happens very rarely in practice.
The IRS prefers to collect through easier methods. They typically target liquid assets like wages and bank accounts first.
Home seizures are expensive and time-consuming for the IRS. The agency seizes only a few hundred homes per year nationwide.
Even if you have a mortgage, the IRS can still seize your home. But they must follow strict legal procedures before taking action.
What Other Assets Can the IRS Take?
The IRS can seize various assets to collect unpaid taxes:
- Wages through garnishment of your paycheck
- Bank accounts through levies that freeze and withdraw funds
- Tax refunds applied directly to your debt
- Vehicles and business equipment
- Real estate including your home or land
Tax Liens vs. Tax Levies: Know the Difference
A tax lien is a legal claim against your property. It doesn’t mean the IRS takes your home immediately.
The lien gives the IRS rights to proceeds if you sell. It can make refinancing or selling your home more difficult.
A tax levy is more serious. It means the IRS is actively taking property to satisfy your debt.
Levies allow the IRS to garnish wages, empty bank accounts, or seize and sell your home.
How the IRS Collection Process Works
The IRS follows a specific process before seizing your home. You’ll receive multiple notices giving you chances to respond.
You must owe more than $5,000 in back taxes. The IRS must obtain approval from a federal judge.
They must send several notices before moving forward. A notice of seizure must be posted at your home.
If the home is jointly owned, seizure becomes more complicated. The IRS generally won’t seize if one owner isn’t responsible for the debt.
What Happens After the IRS Seizes Your Home
The IRS will auction your home for fair market value. If the sale exceeds what you owe, you receive the excess funds.
If the home sells for less than the debt, you could still owe the balance. Any existing mortgage must be paid first from auction proceeds.
You may have a right of redemption after the sale. You can buy back your home within 180 days by paying the auction price plus 20% interest.
Can the IRS Take a Home With a Mortgage?
Yes, but it’s complicated and less likely. The IRS can seize homes with mortgages attached.
When they auction the property, the mortgage gets paid first. Only remaining funds go toward your tax debt.
Most primary residences have mortgages that exceed the home’s equity. The IRS often decides seizure isn’t worth the effort in these cases.
However, wage garnishments or bank levies could prevent you from making mortgage payments. Your mortgage lender could then foreclose, putting your home at risk indirectly.
Jointly Owned Property and Tax Debt
Whether the IRS can seize jointly owned property depends on state law. It also depends on whether both owners are liable for the debt.
In community property states like California or Texas, both spouses may be responsible. The IRS can seize jointly owned property in these states.
In common law states, the IRS usually can’t seize jointly owned homes. This protection applies when only one spouse owes taxes.
How to Stop the IRS From Taking Your Home
You have several options to prevent home seizure. Acting quickly improves your chances of protecting your property.
Many people find success by working with tax professionals. Speaking with a bankruptcy attorney for free can help you understand all available options.
Request a Collection Due Process Hearing
Before levying your home, the IRS must send a Final Notice of Intent to Levy. You have the right to request a Collection Due Process hearing.
At this hearing, you can challenge the tax debt amount. You can argue that seizure would cause economic hardship.
You can request a payment plan during the hearing. You can argue the home’s sale won’t generate enough to satisfy the debt.
You can claim Currently Not Collectible status if payment would cause financial hardship. The IRS won’t collect while you remain in CNC status.
Set Up a Payment Plan With the IRS
Payment arrangements can stop home seizure. The IRS offers several options:
- Installment Agreement: Monthly payments spread over time to pay off your tax debt
- Partial Payment Installment Agreement: Monthly payments without paying the full amount owed
- Offer in Compromise: Settle for less than you owe if you can’t afford full payment
The IRS must agree that you can’t afford full payment for these options. Documentation of your financial situation is required.
File Form 911 With the Taxpayer Advocate Service
The Taxpayer Advocate Service can help if seizure would cause extreme hardship. File Form 911 to request their assistance.
Filing may temporarily stop the seizure while TAS reviews your case. If your request is denied, you can appeal in U.S. Tax Court.
Consider Bankruptcy Protection
Bankruptcy triggers an automatic stay that immediately stops IRS collection efforts. The stay halts wage garnishments, levies, and home seizures.
Chapter 7 bankruptcy can discharge older tax debts. However, it won’t remove tax liens already placed on your home.
Chapter 13 bankruptcy allows you to set up a payment plan. You can catch up on missed payments over three to five years.
Bankruptcy can help manage or eliminate qualifying tax debt. Speaking with a bankruptcy attorney helps you understand how it applies to your situation.
Removing a Tax Lien Without Selling
You can remove a federal tax lien from your home without selling. Several options exist depending on your situation.
Pay the tax debt in full. The IRS will release the lien within 30 days of full payment.
Set up an installment agreement to repay over time. Note that this doesn’t always remove the lien immediately.
Request a lien subordination. Another lender can take priority over the IRS lien, making refinancing easier.
Your Rights When Facing IRS Collection
You have important rights when the IRS attempts to collect taxes. The Internal Revenue Code provides specific protections for taxpayers.
You must receive proper notice before the IRS takes collection action. You have the right to appeal IRS decisions.
You can challenge the amount you allegedly owe. You can request alternatives to seizure through hearings and negotiations.
Understanding these rights empowers you to take action. Don’t ignore IRS notices or assume you have no options.