Can the IRS Take a Taxpayer’s Home?
Yes, but it is a lengthy process and court approval is required. First, the Revenue Officer must prepare a suit narrative report. The suit narrative details the results of the investigation and contains the recommendation to seize the principal residence. The report must make a request for institution of a civil action for judicial approval of a principal residence seizure and state the amount of money expected as the net sale proceeds.
The report will also contain a chronological presentation of facts. I’ve put all of the information and exhibits required in a PDF that you can download by clicking here.
As well, a “suit package” will also be prepared which will contain:
- Form 4477, Civil Suit Recommendation (mark Item 3 as “Other” and enter “Judicial Approval for Principal Residence Seizure” )
- Suit Narrative Report
- Form 2434–B, Notice of Encumbrances Against or Interests in Property Offered for Sale
- Form 2433, Notice of Seizure, with the current accurate legal description (and current derivation clause, if required)
- Estimated minimum net sale proceeds calculation (worksheet, memo, or excerpt from ICS history)
- Copies of Notices of Federal Tax Lien
- Form 13719, Pre-Seizure Checklist and Approval Request; the checklist should reference the appropriate paragraph reference from the suit narrative where the action is addressed
- Copy of Deed to Property
- Commercial title report with explanation of title search results
- Any other relevant documents, such as appraisals, L–1058, L–3174, L–1029, etc.
The completed suit package will be sent to the group manager, through Advisory, and then through the appropriate levels of IRS management, including the area director. Advisory will complete the pre-seizure review as part of the suit review and approval process.
After approval of the suit recommendation, Advisory will submit the case to area counsel for referral to the Department of Justice (DOJ). The DOJ will file a petition with the court and will make an initial showing that:
The taxpayer will be served with an order to show cause why the residence should not be seized. In most cases, the revenue officer will be asked to serve the show cause order. Generally, the show cause order requires personal service or it may be left at the defendant’s usual place of abode with someone of suitable age and discretion. If the taxpayer files a response to the show cause order, a hearing will be held. The taxpayer cannot dispute the tax liability during this hearing.
This process can take a year, so there is time to work out some arrangement. If the taxpayers are retired, live on a pension, are disabled or would suffer hardship, the IRS will generally wait until the house is unoccupied before taking it.
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