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What to Do When the IRS is After Your House

If you have an overdue tax debt, it is possible that the IRS will try to seize your assets. This may mean that they try to take ownership of your home. However, you do have options to keep the IRS from taking your home and liquidating it to cover the balance owed.

Understand Your Rights

To get a better idea of the protections afforded to you when dealing with the IRS, get a copy of the Taxpayer’s Bill of Rights. Among these rights is the ability to challenge the fact that you owe money to the government. explains, “the Taxpayer’s Bill of Rights is designed to clarify taxpayer obligations, establish a system of free tax preparation and representation through federally funded grant programs, and provide banking services to low-income taxpayers who do not have an established bank account.” Knowing what you can and can’t do is the first step to working against the charges filed against you. Keep in mind that, as long as a case is being contested or litigated, the government generally cannot take steps such as taking ownership of your home.

Work with the IRS in Good Faith

Generally speaking, the IRS won’t move to seize property if you are making a good faith effort to pay what you owe. This could mean creating an offer-in-compromise or agreeing to an installment plan. TaxProEZ explains, “Most individuals will qualify for some form of tax resolution. Tax resolution involves an evaluation of the available repayment strategies that are appropriate for the individual taxpayer.” It may also mean trying to convince the agency that you don’t make enough money or have sufficient assets to cover the past due balance. In some cases, the government will waive accrued interest or reduce the balance to make it easier to pay.

What Happens if the IRS Does Take Your Home?

At some point, the government could decide that you aren’t acting in good faith and put a lien on your home. If this happens, you have a couple of options to ensure that you don’t lose the property or equity accrued in it. The first option is to pay the tax bill or enter into a payment plan. Money Under 30 explains, “if your IRS debt is $10,000 or less and you can pay your debt in 120 days with a short-term payment agreement. If your debt it $50,000 or less, you will also have 120 days to pay in full with an individual installment agreement. If more than $50,000, you might not be available for installment plans. For more than $50,000, you should contact a professional.” Usually, taking such action will result in the lien being removed within 30 days.

The other option is to sell the home and use proceeds from the sale to pay off the tax debt. However, this may only work if the house sells for more than the balance on the mortgage and the tax debt combined. Furthermore, you may need to pay off any home equity loans or lines of credit that exist when the home finishes the sale.

When you owe money to the IRS, it is never a good idea to ignore that debt. Instead, take the time to work out a payment plan or other arrangement as soon as possible. This can minimize or eliminate the possibility of your home or other possessions being taken away from you.