Florida’s homestead exemption law protects primary residences against almost all creditors. However, the supremacy clause of the U.S. Constitution allows the IRS to override this exception. So, technically, you can lose your home over IRS tax debt. Fortunately, though, this rarely happens.
Among the thousands of clients I have represented, those who lose their homes to the IRS are mainly “tax protestors.” These people either dispute the constitutionality of income taxes or maintain various anti-tax lines of reasoning. The IRS eventually tires of their arguments and makes an example of them.
The IRS is more likely to place a lien on a home rather than force a sale. Many people think that the terms “lien” and “levy” are interchangeable, but these words carry vastly different meanings. Levy means seizure, the actual taking away of one’s property. A federal tax lien is when the IRS files a public notice of your tax debt. It negatively affects your credit rating, and it also attaches to all of your real or personal property.
Florida follows a lien line, which is essentially a ranking of claims made against your property to settle debts. IRS tax liens rank high on the lien line. Even so, unless you try to sell or refinance your house, you will most probably not experience any effect of an IRS lien about your residence.
The Taxpayer Bill of Rights discourages the IRS from seizing primary residences. The homestead exemption proves that your home is your principal residence. The IRS has to file a lawsuit for your property, and the process is quite lengthy. However, they can and do seize vacation homes and investment properties. Although the IRS can legally take your home over back taxes, the likelihood that they will is extremely slim.