One of the most frequently asked questions by homeowners in the United States is: can the IRS take your house? The short answer to this question is yes. Legally, the IRS can seize your house. But it is important to note that, as an American taxpayer, you have several options before this happens.
This article will explain when and how the IRS can seize your property, and what you can do to prevent it from happening.
When Does The IRS Seize Your House?
As an American taxpayer, if you are initially unable to pay your taxes, you should expect to get a few notices in your email or letterbox from the Internal Revenue Service (IRS), together with instructions explaining your rights as a taxpayer. Although this may look like a big problem, it can easily be resolved through an installment plan using Form 9465.
However, if you owe the IRS a large balance on your tax returns and refuse to communicate with them regarding the inconsistencies in your tax returns, you will eventually have a lien or levy placed on your properties, including your home.
What Happens When The IRS Takes Your House?
A tax lien is a public notice issued by the IRS to notify creditors that you owe them back taxes. This notice gives the IRS authority to take hold of any proceeds from the sale of any property that has a tax lien.
When the IRS puts a tax lien on your house, you shouldn’t sell the house until the debt is cleared. And if you do sell the house, the IRS will seize all the proceeds from that sale to clear the outstanding balance.
It is also important to note that the tax lien follows the property and not the owner (taxpayer). Therefore, if you end up buying a house with a tax lien, you inherit the lien. This gives the IRS authority to come after you for its money.
A tax lien comes in two forms: a silent automatic lien, and the public notice sent by the IRS to the taxpayer’s county records office. When the IRS sends this notice, it is recorded by credit reporting agencies, putting a dent in your credit score.
You also need to understand that the only way a tax lien can be lifted is through full payment of the back taxes, interests accrued, and penalties. The expiration date of the time statute for tax collection can also help to lift the lien.
You can also appeal the decision to seize your house if you believe it was done unjustifiably. When appealing the tax lien, you should first contact the manager of the unit that has filed the lien and explain why the lien is baseless.
If that doesn’t work, you should send your Form 9423, which contains the collection appeal request, to your county collection office. After that, wait for the appeals officer to decide on your case within three working days.
You need to understand, however, that these steps rarely stop the IRS from seizing your house. So, the best solution is to contact the IRS immediately and explain to them why they should not place a tax lien on your house.
How To Avoid A Tax Lien
As a taxpayer, there are several steps you can take to stop the IRS from seizing your house. For instance, the Collection Due Process (CDP) rights require the IRS to notify you that they are about to seize your house by sending you the 1058 letter (Final Notice of Intent to Levy).
In this letter, you must be informed of your right to a hearing with the IRS Appeals Office before the levy goes into effect. At the hearing, you’ll need to convince the IRS officer that the house won’t raise enough money to cover all the back taxes, mortgages, and the cost of the sale.
That way, you can be given a “Currently Not Collectible” (CNC) status. This status is issued by the IRS to people who prove beyond reasonable doubt that paying taxes will cause them significant hardships.
If that doesn’t work, offer to settle the tax debt with the IRS. You can either get an Offer in Compromise (OIC) that allows you to pay some of the taxes or get a Partial Payment Installment Agreement (PPIA), which allows you to make a payment toward the back taxes every month. Alternatively, you can file for bankruptcy. However, you have to file for bankruptcy before a tax lien is placed on your house.Finally, even though the IRS has a right to seize your house if you refuse to pay taxes, you have a right to an appeal if you believe the seizure is unwarranted. Facing a tax lien on your home can force homeowners to consider selling their property for financial or personal reasons. Working with a Trusted House Buyer to get an all cash offer in San Diego – regardless of the state of your home – can often leave you with the most cash in your pocket after the sale.
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