Florida Homestead and the IRS

The IRS is the most significant exception to Florida’s homestead protection. While the Florida Constitution shields a homeowner’s primary residence from virtually all judgment creditors, federal tax liens override state homestead exemptions entirely. The Supremacy Clause of the U.S. Constitution gives federal law priority over state exemptions, and the Internal Revenue Code expressly provides that no state law may exempt property from levy for the collection of federal taxes.

How a Federal Tax Lien Attaches to Homestead

Under 26 U.S.C. § 6321, when a taxpayer fails to pay a tax liability after the IRS sends a notice and demand for payment, a federal tax lien arises automatically against all property and rights to property belonging to the taxpayer. This includes homestead property in Florida.

The lien exists as a matter of law from the moment the tax goes unpaid after demand, but it does not become effective against third parties until the IRS files a Notice of Federal Tax Lien in the public records. Once filed, the lien encumbers the homestead and will appear in any title search. Unlike a judgment lien recorded by a private creditor, a federal tax lien on homestead property is enforceable. The homeowner cannot use Florida Statute Section 222.01’s Notice of Homestead procedure to remove it, and a title company will not issue insurance without addressing the lien.

Can the IRS Force the Sale of a Homestead?

Yes, but the process is heavily restricted. Under 26 U.S.C. § 6334(a)(13), a taxpayer’s principal residence is generally exempt from levy. However, Section 6334(e)(1) creates an exception: the IRS may levy on a principal residence if a judge or magistrate of a United States District Court approves the levy in writing. The district courts have exclusive jurisdiction over this determination.

The process works as follows. The IRS requests the Department of Justice to file a civil action in federal district court seeking an order authorizing the seizure and sale of the residence. The court issues an order to show cause, and the taxpayer has an opportunity to demonstrate why the levy should not be approved. The taxpayer may argue that less intrusive collection alternatives exist or that the IRS failed to follow proper procedures, but the taxpayer cannot challenge the underlying tax liability in this proceeding.

In practice, the IRS rarely forces the sale of a primary residence. The agency’s internal policies discourage seizure of homesteads except where the tax debt is substantial and the taxpayer has no other assets from which to collect. Revenue officers generally prefer to wait for the taxpayer to sell or refinance the home voluntarily, at which point the lien must be satisfied from the proceeds in the same manner as a mortgage. For most Florida homeowners with IRS debt, the practical effect of a federal tax lien on a homestead is that it clouds title and prevents a clean sale or refinance until the debt is resolved.

Duration of a Federal Tax Lien

The IRS has ten years from the date of assessment to collect a tax liability. This is the Collection Statute Expiration Date, commonly referred to as the CSED. Once the ten-year period expires, the tax lien is released and the IRS can no longer enforce collection.

However, several actions can toll or extend the CSED, including the filing of a bankruptcy petition, an Offer in Compromise, a request for a Collection Due Process hearing, or a civil suit by the Department of Justice. If the DOJ files suit to reduce the tax assessment to judgment, the resulting judgment carries its own statute of limitations, which can extend the government’s collection period beyond the original ten years.

Federal Tax Lien After the Taxpayer’s Death

A federal tax lien does not expire when the taxpayer dies. The lien continues to encumber the homestead property after death and transfers with the property to the taxpayer’s heirs or beneficiaries. This is a critical distinction from ordinary judgment liens, which do not attach to homestead property at death.

Heirs who inherit homestead property encumbered by a federal tax lien must satisfy the lien before they can sell or refinance. The lien does not distinguish between probate and non-probate transfers. Whether the homestead passes by will, trust, or operation of law, the federal tax lien follows the property.

Federal Tax Lien vs. Ordinary Judgment Liens

The distinction between federal tax liens and ordinary judgment liens on homestead property is fundamental. A private judgment creditor who records a judgment in the county where the debtor’s homestead is located creates a cloud on title but not an enforceable lien on the homestead. The creditor cannot force a sale, and the debtor can clear the title through Florida’s Notice of Homestead procedure.

A federal tax lien, by contrast, attaches to the homestead as a fully enforceable encumbrance. The IRS can potentially force a sale through judicial action, and the lien must be satisfied before the property can transfer cleanly. The lien survives the taxpayer’s death and follows the property to heirs. These differences reflect the federal government’s status as a “super creditor” whose collection powers are not limited by state exemption laws.

Options for Resolving an IRS Lien on Homestead

A taxpayer facing a federal tax lien on homestead property has several potential paths to resolution.

Payment in full satisfies the lien and triggers a release. The IRS is required to release the lien within 30 days of full payment.

An installment agreement allows the taxpayer to pay the liability over time while keeping the property. The lien remains in place during the payment period but the IRS will not pursue forced sale while the taxpayer is current on the agreement.

An Offer in Compromise permits the taxpayer to propose a settlement for less than the full amount owed. If accepted, the IRS releases the lien upon payment of the agreed amount. The IRS evaluates offers based on the taxpayer’s ability to pay, income, expenses, and asset equity, including homestead equity.

A discharge of the lien with respect to specific property may be available under 26 U.S.C. § 6325(b). If the taxpayer or heirs want to sell the homestead, they can request that the IRS discharge the lien from the property in exchange for payment of the lien amount from the sale proceeds. This mechanism is commonly used when the homestead is being sold and the parties need a clean title for closing.

Waiting for the CSED to expire is a viable strategy when the remaining collection period is short. Once the ten-year statute expires, the lien is released by operation of law.

Tenants by the Entirety and IRS Liens

When a married couple owns homestead property as tenants by the entirety, and only one spouse owes the tax debt, the IRS lien attaches only to the debtor spouse’s interest in the property. The IRS cannot force a sale of the entire property to satisfy one spouse’s individual tax debt because doing so would destroy the non-debtor spouse’s property rights.

However, the lien remains on the debtor spouse’s interest indefinitely during the collection period. If the debtor spouse survives the non-debtor spouse, the lien attaches to the entire property. If the debtor spouse dies first, the lien on the debtor’s interest may be extinguished because the non-debtor spouse takes full ownership by operation of law.

Practical Considerations

Florida homeowners with IRS tax debt should understand that the homestead exemption provides no defense against a federal tax lien. The lien attaches regardless of the property’s homestead status, survives the taxpayer’s death, and can theoretically result in a forced sale. The practical reality is that forced sales of primary residences are rare, but the lien effectively prevents any voluntary sale or refinance until the tax liability is addressed. For homeowners planning around IRS exposure, the homestead should be considered encumbered rather than exempt.