Homestead Protection Ineffective Against Federal Tax Levy

By: Tyler B. Korn, Esq.

A federal tax lien imposed for failure to pay an assessed tax deficiency generally applies to all of the tax debtor’s non-exempt property. Property exempt from levy includes unemployment benefits, certain annuity and pension payments, worker’s compensation, judgments for support of minor children, and certain amounts of wages, salary, and other income.

Most notably, however, real property is not among the types of property exempt from levy. Despite the existence of the generally formidable protection afforded in Florida to homesteads (principal residences), a taxpayer’s home can indeed be attached and levied for satisfaction of a federal tax deficiency.

Certain limitations do exist on the Internal Revenue Service’s ability to seize a taxpayer’s home. The IRS may not seize any real property used as a residence by the taxpayer or any real property of the taxpayer (other than rental property) in order to satisfy a liability of $5,000 or less (including tax, penalties and interest). If the taxpayer is using a property as his principal residence, Sections 6334(a)(13) and 6334(e) of the Internal Revenue Code provide that the IRS may not seize that property without the prior written approval of a federal district court judge or magistrate.

Moreover, unless the collection of tax is considered to be in jeopardy, tangible personal property or real property (not including rented real property) used in a taxpayer’s trade or business may not be seized unless the taxpayer’s other assets subject to collection are insufficient to satisfy the amount due and the expenses of the proceedings.

Taxpayers with assessed tax deficiencies and/or a federal tax lien should immediately contact an attorney.

Korn, P.L. actively represents taxpayers in Federal and State tax audits, disputes, controversies and litigation.

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