When the IRS files its federal tax lien it attaches to all of the taxpayer’s assets, including his home, bank accounts, cars and personal belongs. The federal tax lien ensures that if real property is sold any proceeds will go to the IRS to pay its tax lien. The IRS can also foreclose on its federal tax lien, and sell any property that the taxpayer owns.
There is a myth that the IRS won’t seize and sell a taxpayer’s home. Like most myths there is a grain of truth to it. In order to sell a taxpayer’s primary residence the IRS must obtain an order from a federal district court pursuant to Internal Revenue Code Section Section 6334(a)(13). However, if negotiations break down, or the statute of limitations on collection is about to expire, the IRS can and will seek a court order, and most courts will grant such orders. This is one reason why it is critical, especially in large dollar cases, that taxpayers obtain advice from a tax attorney with experience dealing with these types of tax problems.
A recent case from South Dakota illustrates that tax problems do not get better with age. United States v. Boscaljon (SD SD 2010). The Boscaljons owed about $200,000 dating back to 1993 and 1994. The IRS went to court to sell their residence. At the time of trial the taxpayers were both 74 years old, and living apparently primarily on social security, plus Mrs. Boscalon’s earnings from her $8.75 per hour, 20 hour per week job. Mr. Boscaljon had been diagnosed with cancer, had just completed chemotherapy, and had suffered a heart attack. Despite these facts the IRS brought suit to seize and sell the Boscaljons’ home. So much for a kinder, gentler IRS.