Will the IRS Take My House if I Can’t Pay My Taxes?

That is a question I get at least once a week. The answer I always give is, “The IRS can take your house, after jumping through certain administrative hoops. But, the IRS does not do that very often. The IRS pursues other collection methods much more frequently.”

If the IRS has jumped through all the hoops correctly, it can take the house of a taxpayer who owes money for back taxes. It can take the house either by a direct seizure or through a lien foreclosure suit through the Department of Justice.

According to a collection activity report from the IRS and a Department of Justice (DOJ) Tax Division report from October 2012, in Fiscal Year (FY) 2010 the IRS conducted 605 seizures and referred 221 lien foreclosure suits to the Department of Justice. In FY 2012, the IRS conducted more seizures, 733, a 21% increase. It also referred more lien foreclosure suits to the DOJ, 278, a 26% increase.

But, contrast these numbers to the MUCH more common practice of collecting back taxes through levies (aka, garnishments) of bank accounts, savings accounts, wages, and other sources of income.

In FY 2010, the IRS issued 3,606,818 levies. In FY 2012, it issued fewer levies, 2,961,162, but still a significantly higher number of levies than seizures and referrals for lien foreclosure. That is, in FY 2012, seizures and referrals for lien foreclosures comprised only 0.034% of the combined collection actions of levies, seizures, and lien foreclosure referrals.

So, although the IRS can take your house if you cannot or do not pay your taxes, the probability of that happening is very low.

But, to keep that probability even lower, there are things you can do if you find yourself in the unfortunate position of having outstanding tax bills. Primarily, though, do not ignore correspondence from the IRS. Tax problems do not get better with age.

If you are reluctant to open mail with that logo in the upper left corner of the envelope, immediately contact a professional who works with the IRS on a daily basis to get some guidance and assistance. You may be pleasantly surprised at how much better you sleep at night knowing someone is helping you through what could otherwise be a very stressful ordeal.