Keep your property off the IRS auction list

The IRS has its own kind of Craigslist. But instead of selling its own used items to strangers over the internet, the IRS auctions off property that has been seized to compensate for unpaid taxes.

Need a new car, some antiques, some silver coins or a diamond necklace? Maybe you’ve been hoping to make a bid on a lakefront lot or a 7-bedroom home? Don’t forget to check the IRS auction page to see if there might be something worth pursuing. Someone else’s IRS seizure might just be the treasure you’ve been looking for.

Beware of jointly owned property

If you own a property with a spouse, an IRS lien affects both of you. Technically your spouse’s lien would only apply to their portion of ownership in the property, but in reality a lien on a property is a barrier to its sale. You personally may be free of the lien, but until your spouse is able to release themselves from the debt, it’s your problem, too.

The same is true for property ownership transferred in a will. If you bequeath the family home to your son and daughter, and one of them owes the IRS money that they’re not able to pay, the other will feel the consequences of the lien as well.

Not paying is better than not filing

This year’s tax deadline has come and gone, and hopefully you’ve filed your taxes by now; or at least filed for an extension. If you’ve avoided filing this year out of an inability to pay, however, it’s worth knowing that not filing your tax return will cost you much more in the long run than failing to pay in full. Both failing to file and failing to pay will result in penalties, but you can significantly reduce your penalties by filing and then working with the IRS to come up with a solution for whatever balance you might owe.

The difference between the two penalties is stark:

  • Failure to file will trigger a penalty of 5 percent of your owed taxes each month up to a maximum of 25 percent of what you owe.
  • Failure to pay (in full) triggers a penalty of 1/2 of one percent of what you owe per month up to a maximum of 25 percent of the total owed taxes.