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ASK THE CALIFORNIA EMPLOYMENT AND PAYROLL TAX ATTORNEY – WILL THE EDD AND/OR THE IRS TAKE YOUR HOME?

By Robert S. Schriebman

2018

Introduction

People who owe the EDD or the IRS worry about whether their principal residence is in danger of being seized and sold for the payment of delinquent taxes. There are really two questions here:

  • CAN the EDD and/or IRS legally seize and sell a personal residence?
  • WILL the EDD and/or IRS legally seize and sell a personal residence?

This article will discuss these questions in light of the recent Florida US District Court Case of J. N. Gower (2018FED ¶38,184.62).

When any California taxing agency or the IRS is owed taxes they are entitled to collect whatever they can legally. Let's take a look at the Gower case and see what provoked the IRS into taking Gower's home.

The Case of J.N. Gower

Gower was a CPA by profession. So he knew about dealing with the IRS. He owed 6 years of back taxes. He never attempted to seriously resolve his matter by suggesting either an offer in compromise or a serious installment payment agreement. In fact he was uncooperative, and failed to come up with a viable collection alternative. The IRS felt it had no recourse but to seize and sell Gower's home.

The IRS has always had the power to take someone's home for the payment of taxes. This is nothing new. My own experience, in close to 50 years of practice, is that I have never had a client lose his/her home. I truly believe that the last thing the IRS wants to do is put someone out of their home. The IRS is more likely to seize a vehicle than a residence.

The EDD has traditionally followed a long standing policy of not taking a tax debtor's residence. Because the EDD is a state creditor, a taxpayer whose home is in danger of being taken, can put a "homestead" on the residence to protect a specific amount of equity from the claims of creditors. The current homestead protection amount is $300,000. This is enough protection to discourage most home seizures.

In all the years that I have been dealing with EDD audits and resulting collection activity, I have never seen the EDD seize a personal vehicle or home. The EDD is more likely to collect a debt by placing a "keeper" on site to collect funds coming through the door. On the other hand, if the tax debtor is a high profile individual or company, or if illegal drugs or contraband were involved, the EDD has every right to consider and execute the seizure and sale of a personal residence.

Conclusion

The IRS and the EDD have enormous powers especially when it comes to collecting a tax bill. An IRS or EDD tax collector, doing his or her job according to law, cannot be stopped by any judge, including a U.S. Supreme Court Justice. Both taxing agencies understand and appreciate working within the system to properly resolve tax disputes including the resolution of tax debts. But make no mistake they will not tolerate tactics that are designed to frustrate their audit or collection legitimate functions. Gower lost his home because inaction and bad faith on his part. The IRS got both angry and even with Gower – don’t be a Gower.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

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