After a long day of work or a vacation or sometimes just after running errands, coming back to your cozy house is something you relish. Dorothy’s ruby slipper sentiment is a mantra many of us share. And like any good homeowner, you’ve invested time and care into making it your refuge — a place full of memories and the one space that’s truly yours.
So… it’s certainly NOT something you want to lose to property seizure.
But if you’ve had some tax trouble and found yourself with a heaping pile of back taxes that remain unpaid, you could find your house and other personal property on the line (though seizing a house isn’t a common IRS collection tactic).
Maybe you’ve heard horror stories about the “big bad wolf” IRS snatching up people’s homes unless they get what they’re owed.
The truth is, though the IRS does sometimes enact a personal property seizure as payment for back taxes, they aren’t racing to get your house (or car, or any other property) the way potential buyers might if you put it up for sale today. In fact, the amount of levies every year is honestly pretty low compared to the number of people living in the U.S.
Besides, before conducting a levy:
… a higher-level IRS official needs to determine that your case requires property seizure
… then a collection agent writes a recommendation for property seizure
… which IRS management approves
… and THEN the IRS sends your case file over to the Department of Justice for handling.
The Department of Justice gets your case because the IRS cannot, on its own, take your house. A U.S. District Court judge must approve the seizure. In that case, you would receive a notice of suit from the Department of Justice. You’d also have the right to file an answer in court and defend yourself via litigation.
So let me assuage your fears a little bit one more time by saying only a judge can order your house sold. The IRS cannot do it on its own.
Nevertheless, if you owe back taxes and don’t work with the IRS to settle a payment plan… the IRS can legally get the property seizure process going and potentially seize your home sweet home.
Let’s examine what that looks like.
What they actually do.
Don’t worry … you won’t find out your home is being sold by discovering a brand new Connecticut listing for it on Zillow. Even after getting judicial approval, the IRS has to keep communicating with you.
The first plan of action? Calculate a minimum bid price for your home. This usually amounts to 80% or more of the forced sale value (after subtracting any liens). If you disagree with their numbers, you can challenge their fair market value assessment.
Afterward, the IRS notifies you of the pending sale and announces it through mediums such as local newspapers and flyers in public places. They are required to wait 10 days before actually selling the property.
Proceeds are applied towards your tax debt after covering the costs of the sale. If there happens to be leftover money, the IRS will let you know how to get a refund.
Getting Your Home Back
If you receive a Final Notice or Notice of Intent to Levy bill from the IRS, you don’t necessarily have to pack boxes and move out ASAP. There are several instances where you can get your property back.
The IRS is required to release a property seizure in the following situations:
- The amount owed is paid.
- The period for collection ended prior to the seizure being issued.
- Release of the seizure will help you pay your taxes.
- You entered into an Installment Agreement and the terms of the agreement do not allow the seizure to continue.
- The seizure creates an economic hardship that prevents you from meeting basic, reasonable living expenses.
- The property’s value is more than the amount owed and releasing the seizure will not hinder their ability to collect the amount owed.
But keep in mind that the release of a seizure does not mean you don’t have to pay the balance due. You must still arrange with the IRS to resolve your tax debt or the property seizure will be reissued.
Because I understand clearly how this system works and know the IRS lingo and am looking out for your best interests… let me emphasize this fact:
Coming to an agreement with the IRS is MUCH easier to do with an experienced Connecticut professional by your side.
At Emelia Mensa, CPA, we can help you take a proactive approach with your taxes rather than waiting for the worst outcome to happen. We can help you come up with a payment plan, settle your tax debt, and talk to the IRS for you.
Over these last few years of housing boom and premium pricing, the last thing you want is for the IRS to sell your assets and take the profit.
If tax debt has piled up on you and you’re wondering if property seizure is in your future… and you just need to ask the hard questions and get some real help… let’s have a conversation:
We’re in the business of bringing you some relief,
Emelia Mensa, CPA