| Taxpayers who owe the IRS back taxes face some | | | | QSV "quick sale value" (80% of the full fair market |
| fairly strong collection laws permitting the IRS access | | | | value) to make this determination. Example 2 - Your |
| to just about everything that the taxpayer owns, now | | | | house is worth $300,000. The QSV is 80% of |
| or in the future. It is easy for the IRS to take the | | | | $300,000 or $240,000. If you owe more than $240,000 |
| money in your bank accounts, to go after your social | | | | then the IRS will show little if any interest in taking your |
| security, and clean out your retirement plans. While | | | | house. |
| they are permitted to take these steps, there is no | | | | What if you owe only $225,000 and the QSV is |
| guarantee that they will. The taxpayer runs the risk of | | | | $240,000? Then, in theory, the IRS could take the |
| losing all of these sources of income and more. | | | | house and use the $15,000 remainder to apply to your |
| But the most dreaded fear is the loss of the personal | | | | debt. However, it is unlikely they will do so for such a |
| residence. Can they seize your home and toss you in | | | | small amount. The IRS is aware that taking a personal |
| the street? Under section 6334 of the Internal | | | | residence is a serious act, and will, for the most part, |
| Revenue Code the answer is yes they can. Once | | | | do so only in rare situations and only after making |
| again, this does not mean that they ever will, only that | | | | numerous attempts to resolve the liability through other, |
| the law permits them to do so. It may be of little | | | | friendlier methods. |
| comfort to taxpayers with huge debts, but the IRS | | | | A tax debtor does not have many options to choose |
| cannot take a home if the tax debt is less than $5000. | | | | from when trying to resolve their tax debt. The first |
| The larger hurdle for the IRS and one that usually | | | | and most impracticable one is to pay off the debt in |
| slows them down considerably is this - before the IRS | | | | full. Forget that one! Who has $50,000 sitting around to |
| can seize a taxpayer's personal residence they must | | | | pay the IRS! The second option is the installment |
| apply to a neutral magistrate (judge) for permission to | | | | agreement. The problem there is that the IRS will want |
| do so. This requirement limits the ability of the IRS to | | | | you to pay the debt within 60 months, often calling for |
| act unilaterally. While the tax man can take your bank | | | | a monthly payment far in excess of what you can |
| accounts and retirement without asking a court for | | | | afford. |
| permission, the law requires them to ask in the case of | | | | The final choice is an offer in compromise. Under this |
| a house. This gives the taxpayer the opportunity to | | | | solution, you offer the IRS an amount less than what |
| work with the IRS to resolve the outstanding tax debt. | | | | you owe, but what you can reasonably afford to pay |
| The IRS does not want your house, it only wants the | | | | over time. If the IRS accepts your offer, they will stop |
| money. If you work out a plan to pay the money, the | | | | all collection actions and you will be expected to pay |
| IRS will not take your house. | | | | the amount of your offer religiously. No more |
| Before the IRS will consider taking a personal | | | | backtracking and excuses. The offer in compromise |
| residence, it must determine that there is sufficient | | | | will cost somewhere between $2,000 and $3,500 to a |
| equity in the home to justify such a drastic measure. | | | | licensed attorney or CPA. From the time you hire an |
| For example, if your home is worth $250,000 and the | | | | attorney to prepare it for you, expect a delay of |
| mortgage on the home is $252,000, then there is no | | | | several months while the documents are collected, |
| equity in the home and the IRS will show no interest in | | | | prepared and submitted. |
| seizing it to satisfy your tax debt. The IRS uses the | | | | |