IRS Tax Relief before a house levy

The IRS can seize real estate, and its levy page lists it alongside wages, bank accounts, and vehicles. Federal law adds protections for the home you live in, though, and the IRS usually must warn you at least 30 days before a levy.

What has to happen before any levy

A levy is a legal seizure of your property. The IRS page What is a levy? says it will usually levy only after these four steps:

1. The IRS assessed the tax and sent you a bill, called a Notice and Demand for Payment.
2. You neglected or refused to pay it.
3. The IRS sent you a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days before the levy. It can hand you that notice, leave it at your home or usual place of business, or send it by certified or registered mail to your last known address.
4. The IRS sent you advance notice that it may contact third parties about collecting the tax.

Before a levy, the IRS's final notice tells you about your right to a Collection Due Process hearing with the IRS Independent Office of Appeals. You have 30 days from receiving that notice to ask for the hearing. The IRS says to contact it right away if you receive it. During that hearing, the IRS is generally prohibited from levying your property if that levy is the subject of the hearing (Publication 594).

The extra rules for a home

The tax code exempts some property from levy. Under 26 U.S.C. 6334, any real property you live in, or real property you own (other than rented property) that someone else lives in, is exempt when the amount of the levy is $5,000 or less.

Under 26 U.S.C. 6334(e)(1), a principal residence can be levied only if a federal district court judge or magistrate approves it in writing.

A lien is different from a levy

A federal tax lien is the government's legal claim against your property, your home included. It exists once the IRS has assessed the tax, sent a bill, and you haven't paid in time. A lien doesn't take the house. The IRS can file a public Notice of Federal Tax Lien so that other creditors know about its claim.

The IRS describes ways to reduce a lien's effect. A discharge removes the lien from a specific property. Subordination lets another creditor go ahead of the IRS, which the IRS says may make it easier to get a loan or mortgage. Paying the debt in full releases the lien within 30 days.

How to stop it before it gets there

The IRS page How do I avoid a levy? says to pay as much as you can, work with the IRS on the rest, and not ignore billing notices. Individuals can call 800-829-1040 or the number on the notice.

Asking for an option also holds collection back. The IRS says it is generally prohibited from levying while a payment plan request is pending, and it suspends most collection while it considers an offer in compromise. What to do when you owe the IRS and can't pay compares those options side by side.

If a levy has already started

The IRS says a levy may be released if it's causing an immediate economic hardship or was issued in error. Its levy page links to the steps for asking for a release.

If an offer in compromise is the option you're weighing, read how long an offer takes. If the letter you have is a CP14, start with what a CP14 notice means. Spokane readers can find the local details on the Spokane page.