In Atlanta, Georgia, can the IRS Take my House or car if I owe Past due Taxes?

Yes, in Atlanta, Georgia, the IRS can take your property–including your house and/or car–to satisfy a tax debt. But, filing bankruptcy with a bankruptcy attorney in Atlanta, Georgia, may be able to wipe out that tax debt, depending on how old the tax debt is.

The IRS collection process starts with a tax assessment. An assessment is when the IRS officially notes in its records how much a taxpayer owes for any tax year or tax period. Assessments are based on returns that are filed by the taxpayers, returns that the IRS files in place of returns a taxpayer neglects to file or from changes the IRS makes to a return. Collections will begin when a tax is assessed but not paid. And collections can include a tax levy or tax lien.

What is a tax levy?

A levy is a legal seizure of your property to satisfy a tax debt. With a tax levy, the IRS can seize your property – for example, your house, car, bank account or wages – to pay your taxes if you failed to make arrangements to settle your debt.

  • The IRS can seize and sell property that you hold (like your car, boat or house).

  • The IRS can seize and sell property that is yours but is held by someone else (like your wages, Social Security, retirement accounts, bank accounts, licenses, rental income, the cash loan value of your life insurance or commissions).

What is a tax lien?

A tax lien is a claim used as security for a tax debt and can have a direct impact on a taxpayer’s credit rating. If a tax liability remains unpaid after the IRS issues a notice and demand for payment, a tax lien is automatically filed to record a claim by the IRS to all property owned by the taxpayer.

How can Filing Bankruptcy in Georgia Help me if I Have a tax levy or tax lien?

If the IRS has levied your wages or filed a lien against your property in Atlanta, Georgia for past due tax debt, filing bankruptcy may wipe out that tax debt, depending on how old the debt is.

The general rule for the dischargeability of tax debt in bankruptcy is that if the tax debt is more than three years old, it is normally dischargeable. However, the three year rule is subject to rules and exceptions.

(1) The tax debt must be income tax debt in order to be dischargeable.

(2) You must have timely filed the tax return for the year in question in order for the tax liability to be dischargeable in bankruptcy. For example, if you are seeking to discharge a 2010 income tax liability, you must have timely filed the tax return by April 15, 2011. The three year rule is calculated from the due date. Thus, a timely filed 2010 tax return would render the tax liability dischargeable in bankruptcy if the bankruptcy petition is filed after April 15, 2014, or three years from the April 15, 2010 due date.

(3) There are additional rules related to whether you have made an offer in compromise to settle the tax debt or if tax liability was assessed after you filed the return. If you filed your tax return late, then the tax debt is not dischargeable until at least two years after you filed the return, if the tax return was due more than three years before the date of filing the bankruptcy petition. Even though filing bankruptcy can discharge old income tax debts, any tax liens will remain. The IRS can choose to exercise its right under the liens if you have any equity in any property.

In Georgia, are tax debts discharged differently if I file Chapter 13 bankruptcy versus Chapter 7 bankruptcy?

Tax debt in Georgia is treated differently depending on whether you are filing a Chapter 7 or a Chapter 13.

  • In a Chapter 7 bankruptcy, a dischargeable tax debt is discharged when the court issues an order discharging all debts.

  • In a Chapter 13 bankruptcy, dischargeable tax debt drops from a “priority debt” status to an “unsecured nonpriority” debt status. This means that if you are in a Chapter 13, then nondischargeable priority tax debt must be paid. However, dischargeable tax debt is considered nonpriority and does not necessarily get paid back at 100%. For example, if your Chapter 13 plan only proposes to pay back 25% of unsecured, nonpriority debts (such as credit cards, medical bills, or dischargeable tax liabilities), then you will only pay back 25% of the nonpriority tax debts. As discussed in the Chapter 13 section of this website, the percentage of unsecured nonpriority debts that you have to pay back depends on factors such as your disposable income and whether you have filed bankruptcy in the past.

Take immediate action if you have received a Notice of Intent to Levy or Notice of Levy from the IRS and speak with a qualified tax professional to understand all of your options. If you would like to learn how bankruptcy can be an option to resolve issues with unpaid taxes, contact The Law Offices of Charles Clapp at (404) 585-0040 for a free initial consultation.