Buying a Home with a Tax Lien
Buying a home with a federal tax lien. A tax lien is the government’s legal claim against your property. Tax liens are more powerful than levies or garnishments, which primarily target your current income. Liens protect the government’s interest in ALL of your property, including any real estate you may own, other personal property, and your financial assets.
When the IRS places a tax lien on your property, two primary things occur:
- The IRS places your balance due on the books (this assesses your liability).
- The IRS sends you a bill that explains how much is owed (notice and demand for payment).
As part of the process, the IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property. The lien attaches to everything in your name, from a home to a stamp collection.
Here’s where it gets tricky for home buyers and sellers. Taxpayers with an IRS tax lien cannot sell their homes without IRS involvement in the transaction. Typically, a taxpayer will need to go through a formal process with the IRS in order to get their permission to sell the home. If the IRS agrees, any sale proceeds go to the IRS first before the taxpayer.
Any taxpayer who owes the IRS will commonly face hurdles when buying a home. Mortgage lenders don’t like seeing an IRS tax lien, so taxpayers have to address the lien with the IRS before a home can be purchased.
Fortunately, the IRS has procedures that taxpayers can follow after a tax lien has been filed. For help with an IRS tax lien, get in touch at Help@LandmarkTaxGroup.com or call (949) 260-4770. Don’t let the IRS stand between you and your next home purchase or sale!