If my mother didn't file taxes due to dementia, can they take her house for back federal taxes?

The default method by which the IRS calculates taxes for taxpayers who do not file tax returns can result in numbers that are much higher than if the taxpayers file their own returns with all the deductions and credits factored in.

Thus, unless you have already checked the IRS's numbers, you should not assume that your mother owes as much as the IRS is claiming.

A large portion of the amounts the IRS is claiming that your mother owes likely is from penalties. The IRS has the authority to waive some or all of the penalties if the taxpayer has valid reasons why the returns were not filed. Having dementia likely is a valid reason why a taxpayer did not timely file tax returns.

What you should do as your mother's representative is to review her specific facts with tax professionals. Attorneys, CPAs, and Enrolled Agents (EAs) are among those who can represent taxpayers before the IRS in administrative proceedings. Attorneys can appear in court. On the other hand, attorneys generally charge more than other professionals. The services of attorneys are not always needed.

Whether your mother will need an attorney is not known from the facts given. You can review the facts with the professionals then decide what to do next.

The IRS is a powerful creditor and can force a sale of a house if taxes are owed even in states that offer creditor protection from forced sale by other types of creditors. I would definitely recommend you see an attorney if you would like to try to keep the house. You will not be able to transfer the house to protect it from tax debt, but you will not be personally liable for the taxes unless you owned the home or signed the mortgage. Please contact an attorney in South Carolina that specializes in tax. An initial consultation to get some answers may either be free or a minimal charge for the hour, but well worth the advice you need right now.