IRS Collections
The IRS has a time limit or “statute of limitations” to legally assess and collect taxes against a taxpayer from the time the return is filed. Usually, the assessment must be within three years and
the tax collected within 10 years. There are exceptions to this rule, based on special circumstances.
When a taxpayer does not file a tax return, the statute of limitation protections
of assessments does not apply to the taxpayer, even if the IRS files a tax return for the taxpayer (SFR)
and assesses tax against them.
Consider that there are failure to file penalties along with failure to pay and interest penalties. So, file those tax returns even if you do not have the money to pay.
Does Your Homestead Protect You?
Filing for homestead protection at the State level will not keep the IRS from seizing your house. The reason is that Federal Law trumps State law and the IRS can seize your personal residence if they decide to use it to pay delinquent tax.
Filing Bankruptcy?
Although certain tax debts are dischargeable in Bankruptcy, usually only after they "Age" for specific legal terms, the tax lien is not.
If you are thinking of filing for bankruptcy protection, there are a few things that you need to understand before you talk to an attorney. First, select a bankruptcy attorney that has a strong background in taxation. Surprisingly, many make major mistakes with the IRS. Secondly, don't get mad at the IRS and threaten them over the phone with filing for bankruptcy. Sounds silly? Many people do it and live to regret it. Why, because if the IRS thinks that there is a chance that you are going to file for bankruptcy, they will file a lien on your property the next day.
Interestingly, even though your IRS tax liability may end up being discharged by the bankruptcy court, the lien will remain on your house. It remains because the lien is what is called an In Rem action and the bankruptcy only affects In Personam actions. Accordingly, once the bankruptcy petition is filed, the IRS is prohibited from filing any liens on your property, so there is a race to file.