The IRS wants your house first

You owe the IRS.

You've got equity in your home. And you figured you'd just set up a payment plan like everybody else.

That plan just got harder.

This week, a colleague of mine posted in a professional forum for tax representatives. A California revenue officer had just told him the IRS changed how it handles home equity before approving a payment plan.

It used to work like this. You'd apply for a home equity loan. Get turned down once or twice. Show the denial letters. The IRS would set the equity aside and move on to your payment plan.

Now? The officer said they want the equity first. Borrow against it or sell. Then we'll talk.

My colleague's first reaction was the same as mine. Some revenue officer group can't just decide that. 

So I checked the manual.

They didn't just decide it. The IRS rewrote its own collection handbook this summer.

Here's what changed, and what it means for you: 

• The June 2026 rewrite of the IRS Financial Analysis Handbook now says the IRS expects you to use equity in your assets before it considers other options. That's IRM 5.15.1.20(3).

• Why "two denials and done" may no longer protect you, and what a revenue officer will ask for instead.

• The one word in your financial statement that tells the IRS whether to come after your equity.

• Why owning a home is now the single biggest factor in whether you get a normal payment plan.

• The appeal right most people never use, and why you have to use it fast.

Now the part that matters.

This does not mean the IRS can force you to sell your house tomorrow. The manual still has rules about loan denials, hardship, and what happens when a loan payment would wreck your budget. Those protections are still on the books.

But somebody has to use them. Revenue officers don't volunteer them.

What the professionals are seeing right now: 

• One California revenue officer told a representative the old loan-denial practice is out.

• Another practitioner in the same discussion said he hit the same wall, appealed, and won his client a payment plan. It took more than a year.

• Others are reporting the IRS has gotten more aggressive on equity in Offer in Compromise cases too.

That last point should get your attention. More than a year of fighting is a long time to live with a lien, a levy threat, and a revenue officer calling.

Here's who should worry most:

If your case is assigned to a revenue officer. If you owe more than a simple payment plan covers. If you own a home with real equity.

That's the person they're looking at now.

What waiting costs you: 

Every month this sits, penalties and interest stack up on top of what you already owe. Every month, a revenue officer is building a file on your assets. And once they've written down that you "refused" to use your equity, you're arguing uphill.

The best time to deal with this is before the revenue officer makes that call. Not after.

If you've got IRS debt and a house, call my office at 909-570-1103 or book an appointment at CallTaxEA.com. 

We'll review where your case stands, what the IRS can and can't demand, and how to protect your equity while getting you into a plan you can live with. 

Don't let them take the house first.

Carlos Samaniego, EA
The Tax Debt Detective
Tax Debt Consultants LLC

P.S. The rule changed in June. Most people with IRS debt have no idea. If you own a home and owe the IRS, call 909-570-1103 before your revenue officer calls you.