Can I sell my house if I have a tax lien?

-

My Middleburg, FL practice focuses on representing clients who have problems with the IRS that they're not sure how to handle. One such thing I hear about is that they really need to get out from under the expenses of owning their home, but they don’t think they can sell because there’s a tax lien recorded in public records. Guess what? You can still sell your house. In fact, the IRS WANTS you to sell your house, especially if you can’t afford it anymore. Basically, a tax lien is just the IRS posting a public notice saying, “I get mine before the homeowner gets theirs.” That’s all. Here are some examples:

1.      Your house is worth $200,000, you owe the bank $100,000, and there is a tax lien for $20,000. Let’s assume closing costs are $10,000. This one is easy; the IRS will get all their money. $200,000 sale price minus $100,000 to the bank, $20,000 to the IRS, and $10,000 for closing costs. That leaves $70,000 for you.

2.      Your house is worth $200,000, you owe the bank $180,000, and there is a tax lien for $20,000. Again, closing costs are $10,000. This time there’s only $10,000 left after the bank and closing costs are paid so the IRS only gets $10,000. You get nothing. The IRS will release the house from the lien once they get the $10,000 from the title company. Prior to closing, the IRS will also want proof that this is a true fair market sale; contract, appraisal, etc.

3.      Your house is worth $200,000 but you owe the bank $250,000. Essentially a short sale. The bank will still release the house from the lien, but you’ll have to get them involved in the process before closing to show them the contract, appraisal, and other information to show this is a valid fair market sale.

However, it is critical that this be worked out with the IRS Technical Advisory Group (also called the “Lien Unit”) in advance of the closing. As soon as you know you have a buyer it is time to get a tax professional involved to work on the tax lien issue because it can take several weeks to get it sorted out.

If you have any questions about IRS tax liens or any other IRS issue, please contact my Middleburg office at 904-600-3450. 

Angela Yonge
Enrolled Agent
Acorn Bookkeeping & Tax, LLC
904-600-3450


Location: Middleburg, FL 32068, USA

Comments

Post a Comment

Popular posts from this blog

How long does the IRS have to collect taxes?

-
In my Middleburg, FL office , I’ve had people ask the question “How long does the IRS have to collect the taxes I owe?” What they really want to know is are they going to be running from this forever? The answer is no: the IRS only has 10 years from the date tax is assessed to collect it. There are a few things you can do that would cause the IRS to be allowed to have more time to collect but, in general, after 10 years the tax is unenforceable. Why is this important to you? It is important to know what things you can do that will inadvertently cause the IRS to get more time. If you file an Offer-in-Compromise, a CDP (appeal) request, have a pending installment agreement, or file for bankruptcy, they will all freeze that 10 years and the clock stops, at least temporarily. The IRS is not allowed to try to collect money from you during these times, so it is only fair for that amount of time to get tacked on to the end of the 10 years. That little nugget of truth is why it is i...
Read more

Tax Deductions: Are you playing the audit lottery?

-
At my Middleburg, FL office , when new clients come in, I always ask them for copies of prior tax returns to review. Many times, I find that clients have been playing the ‘ audit lottery ’. The audit lottery, as I like to call it, is when you know a deduction you’re using is sketchy at best, but you take it anyway hoping the IRS won’t notice. You may even convince yourself that it is legitimate since you got your refund as usual and no one said anything. For example, you heard from your best friend’s mother-in-law that she always writes off her dry cleaning, make up, and manicures because she is a Realtor and must look professional. Alright, I see where she’s going with that idea, but it seems a little sketchy. Perhaps your mechanic writes off a home office because he takes his invoices home from the shop to reconcile his bank account in peace and quiet. He’s working right? Seems legit. Guess what? Those are examples of what is NOT allowed. It doesn’t matter how many years they’...
Read more