Pay your property taxes or lose your home!


Here in the United States, 13 states have the power to sell your property to pay unpaid property taxes. In one recent case (later overturned) a $28,000 home was sold to pay a state tax debt of just $8!

As we frequently show in our blog here at Defense Tax Partners, there are a lot of ways that the IRS and state tax boards can get the money you owe them. Home equity forfeiture is one of the nastiest of them all.

What is home equity forfeiture?

Laws in 13 states – a third of the country – permit a county to seize your home and sell it if you do not pay your property tax. Once more, with the recent exception of Michigan, they can do it even for a minor tax debt and retain the rest of the money. 

These are of Alabama, Colorado, Maine, Massachusetts, Michigan, Minnesota, New York, North Dakota, Oregon, Wisconsin. In Arizona, Illinois, Massachusetts, and Nebraska they sell the debt to private companies who have the powers to seize property and sell it to pay off the debt. 

The state and private companies can do this in some cases without even confirming that you have received notice of the proceedings against you. 

In several different cases, counties have seized someone’s property and sold it even for quite tiny sums of tax debt. Michigan recently became notorious when a house and property were seized and sold for $24,500. The tax debt? Just $8.41! To his credit, 83-year-old Uri Rafaeli fought the state all the way to its Supreme Court and won. This has changed the state law on the matter. 

Arizona handed over a debt of just under $50 to a firm of tax collectors on a property who sold it from over the owner’s head for $45,000. Not a bad profit!

In Nebraska however, Walter Barnette had his $25,000 home and property seized under state laws for a $986 property tax debt. This could well be heard in the Federal Supreme Court. Under the law, the county only had to write one letter and did not have to confirm he had received it. They received it back, undelivered on three occasions. Barnette did not even know he was being investigated until he was suddenly told he no longer owned the property and had to move out. 

Does the IRS do this too?

Considering the IRS has such a fearsome reputation and legendary powers, you would be surprised to find that it rarely takes such measures. It took physical assets from tax debtors just 228 times in 2019. 

It is far easier (and cheaper) to seize money from the bank accounts and employers of those who owe them. The IRS issued over 782,700 levies in 2019. These electronic seizures are far quicker and easier to manage – no one even must leave the office to do it! Wage garnishments – forcing your employer to take large chunks of your income and pay it directly to them – are common as are freezing bank accounts and forcing you to pay that money to them. 

So, what can you do?

The first thing you should do in those states where you could have your property seized is ensure that you pay all your taxes on your property. Given that Massachusetts is believed to have made over $50 million in disposing of its citizens’ property you can see that they have a fair incentive to go after you for your property tax debt. 

Whether a Federal or state tax debt, where the law comes into play it’s time to call a lawyer. Here at Defense Tax Partners we can help you with a wide range of Federal and state tax issues. As soon as the debt becomes unmanageable then you should call us to help negotiate your way out of the problem. We look forward to hearing from you!

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