Can the IRS Take Your Home or Business?

The Internal Revenue Service (IRS) is one of the most powerful government agencies. It has the ability to exercise extreme collection efforts when pursuing a tax debt. If you owe a significant tax liability, the IRS can put a lien on your property, place a tax levy on your bank account, or issue a wage garnishment.

The good news is that the IRS is usually willing to work with a taxpayer. They may agree to an installment agreement or accept an “Offer in Compromise." It all depends on how much you owe and the reason for your tax debt.

Here, we'll explain the lengths the IRS can go to when collecting a past-due income tax bill. Specifically, we'll discuss whether the government can seize your home or business. 

If you owe a lot in back taxes and are worried about what the IRS will do, this article can help you understand what may lie ahead. Depending on your situation, you may also want to consult a tax attorney or criminal defense attorney.

The IRS Collection Process

When you owe money to a credit card company, they will take collection action against you. It's the same when you owe money to the IRS. 

The difference is that the law limits what the banks and credit card companies can do to debtors. The IRS has almost unlimited power when it comes to collecting back taxes.

The first thing the IRS will do is send you a notice detailing your unpaid taxes. It will list the tax years for which you owe and reference past tax returns showing why you owe the government money.

Once you receive notice of your tax liability, the best thing to do is contact the IRS agent handling your case. You may be able to work out a payment plan and avoid penalties and interest. The last thing you want to do is ignore the IRS. They will not go away or forget about your debt.

It is essential to be proactive with the IRS and try to negotiate a solution. Otherwise, the IRS will begin the collection process, including federal tax liens, liens on real estate, property seizures, and IRS levies. The IRS can also intercept your future tax refunds.

Can the IRS Seize Your Home or Your Business?

The quick answer is yes. The IRS can take your home or business. The Internal Revenue Code gives the IRS District Director the power to do this, including the power to seize a taxpayer's primary residence.

However, taxpayers who owe less than $5,000 are exempt from IRS seizure of real and personal property.

Once the government seizes your home or business, they can hold a public sale of your property. The only way you'll be able to recover your property is by paying the minimum bid price at the auction.

The Internal Revenue Service Restructuring and Reform Act of 1998 (1998 Tax Act) also allows federal trial court judges to seize homes and businesses.

The Seizure Process

The IRS must follow specific procedures when seizing a taxpayer's home or business. They cannot simply knock on your door and evict you.

The IRS agent must first ask your permission to enter your premises and seize your home. If you wish to comply with their request, you can sign your name on a short form and walk away.

The IRS cannot force you out of your home. They must get court approval before they do this. If you refuse permission, the IRS will apply for a seizure order from a U.S. District Court judge or magistrate. 

Once the judge issues the seizure order, IRS agents will prepare to descend upon your property. They may carry weapons when they do this.

The agents will allow you to collect your personal effects. They will then padlock the premises, post a public notice, and arrange to sell your home and business assets to the highest bidder.

Remember that taking a taxpayer's home or business is a last resort. The government would much rather work out a payment arrangement with you than take your property. This is especially true if your home is already in foreclosure or if you can show an economic hardship.

Common Reasons Taxpayers Lose Their Homes or Businesses to the IRS

One of the primary reasons people lose their property to the government is that they ignore IRS notices. Many taxpayers reported receiving IRS collection notices, including the IRS final notice of intent but were afraid to call them. They assumed they would have more time to come up with a solution.

Other taxpayers simply don't have the money to make monthly payments to the IRS. Nor do they have the money to hire a tax professional. Unfortunately, the longer you let things go, the harder it will be to find a solution with the collection agency.

Some seizures result from poor communication between the taxpayer and the IRS collector. Most people who owe taxes can negotiate a satisfactory solution with IRS collectors.

Don't Lose Sleep Over Taxes: Call a Tax Attorney

The IRS can enforce federal tax laws and collect back taxes. However, there are limits to what they can do. There are also ways to settle your tax issue without the IRS resorting to drastic measures.

A skilled tax attorney can help you negotiate a payment plan with the IRS or appeal IRS actions. If the government is threatening criminal charges for failure to pay your taxes, you may need a criminal defense attorney.

Remember that you don't have to handle this on your own. Contact a tax law attorney near you to learn more about your options.