It has been my experience that men and women have very different attitudes toward the care and preservation of their home.
For example, I have three grown daughters. They have modest digs, but each has spent a great deal of time making them homey – flowers, landscaping, accessories, etc. I also have two grown sons. Each lives in a heap and are concerned mostly about their refrigerators and televisions.
This stark difference has also been evident with my clients who owe money to the IRS. Almost without exception, the wife is lazer focused upon protecting her home from seizure and sale by the IRS. And again, almost without exception, the husband views the home merely as one of several assets he would like to keep.
Several years ago I wrote about this situation. Since then there have been some administrative and judicial changes so I wanted to update you on these issues. So today we are going to talk about the possible seizure and sale of homes by the IRS in today’s environment..
Folks, the harsh reality is the IRS can and will seize and sell our homes to pay delinquent taxes. Many of us who live in Texas mistakenly believe our homes are safe because under Texas law our homesteads are generally exempt from the claims of creditors. Unfortunately, Texas law concerning homestead exemption is not binding upon the federal government. The IRS can and will file a federal tax lien against your home and can and will sell the home to pay delinquent federal taxes. They can do this administratively, and they can also go into Court and essentially foreclose. They can also get a Court Judgment against the house and wait until much later to foreclose while you make payments on the mortgage and increase the equity.
Folks, another harsh reality is the IRS can seize and sell the home to pay the tax debt of only one spouse. Again, many in Texas incorrectly believe their home is safe because creditors may not be able to sell the joint assets of the innocent spouse to satisfy the debt of the other spouse. Again, state law restrictions do not bind the IRS. The Service can sell the homestead even if only one spouse is liable for taxes to the IRS. However, there are certain limited exceptions in cases of special hardship.
So the issue is – how do you protect your home from seizure and sale by the IRS?
The good news is there are a number of approaches that can protect you and your home. The bad news is they are complex and differ depending upon the facts of each case. For example, if you are about to get married you can protect what you are bringing into the marriage from the tax debts of the other spouse. If you are already married, you may be able to protect your share of the equity in the house from the tax debts of the other spouse. You need a good lawyer here to draft the right documents.
However, if you both are liable for the tax debts, your choices, depending upon an analysis of the facts, are more limited (for example whether you are an innocent spouse) and may depend upon whether or not a federal tax lien has already been filed.
To add even more complexity, your ability to protect your home decreases the longer you wait to act. In the early stages of liability, you may have more planning opportunities than in the later stages of liability. So don’t stick your head in the sand – time is not on your side.
Folks, this can be a very complex area of law that is intertwined with federal seizure rules, state laws on creditors, and state laws on property rights and marital property rights. But all of this complexity can work to your advantage if you act early enough.
The truth is our homes often mean more to our wives than they do to us. But the loss of our homes to the IRS can and will definitely impact you- certainly through your wives – either because you truly care about their needs or because they will soon let you know how angry they are.
We are not kids anymore. Don’t wait or procrastinate any longer. Be responsible and do something now – for the sake of both of you – and your marriage.
David Leeper is a Board Certified federal tax attorney with 38 years experience . He can be reached at 915-581-8748 or by email at firstname.lastname@example.org