6.5.2 Seizure of a Home

The IRS must obtain a federal court order to sell a principal residence for tax debts. Such collection actions are rare. A taxpayer’s principal residence is exempt from seizure for tax debts less than $5,000. For debts greater than $5,000, possible defenses to seizure include IRS noncompliance with the laws and procedures applicable to levy and the existence of reasonable collection alternatives. There may be other defenses if the home is jointly owned and the co-owner is not liable for the tax debt.1

Seizure does not automatically require a taxpayer to move out. The IRS will not evict a taxpayer after the sale; eviction can only be accomplished by the buyer, who must bring an eviction action in state court. 

Purchasing the property at a tax sale also does not grant the buyer full title to the house. After the sale, the taxpayer has 180 days (not 6 months) to redeem the property by paying the full bid price plus interest at 20% per annum.2 If the taxpayer plans to redeem, it may be possible to rent from the purchaser until the taxpayer completes the redemption process.

• 1The district courts have some discretion under I.R.C. § 7403 to deny a foreclosure sale where the IRS holds a lien on only part of the house. See, e.g., United States v. Rodgers, 461 U.S. 677 (1983); United States v. Winsper, 3:08CV-631-H, 2010 WL 4638598 (W.D. Ky. Nov. 4, 2010) (finding that expectation of non-liable spouse was a factor weighing in favor of denying foreclosure), rev’d on other grounds, 680 F.3d 482 (6th Cir. 2012) (reversing denial of foreclosure due to district court’s abuse of discretion on other factors); United States v. Jensen, 785 F. Supp. 922 (D. Utah 1992) (harm to terminally ill nondebtor outweighed delay to IRS); United States v. Jones, 877 F. Supp. 907 (D.N.J. 1995) (nondebtor wife kept house in return for ½ rent payments to IRS); see also United States v. Craft, 535 U.S. 274 (2002) (holding that I.R.C. § 6321 federal tax lien attaches to taxpayer’s rights in “entireties property” even though state law exempts entireties property from creditors’ claims that are only against one spouse); IRS Chief Counsel Notice 2003-60, (IRS position on Craft).
• 2I.R.C. § 6337.