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Protecting Your Assets: Understanding What the IRS Can Seize for Unpaid Taxes

When it comes to settling scores with the IRS, few things strike as much fear into the hearts of taxpayers as the thought of asset seizure. The power the IRS holds to collect on outstanding tax debts is considerable and, understandably, the prospect of losing property due to unpaid taxes is daunting. If you have unpaid taxes, here’s what you need to know about IRS asset seizure and what you can do to protect your property.

Introduction to IRS Asset Seizure

You may not be aware, but the IRS has broad powers to collect taxes owed by any means necessary, including the authority to seize assets. The process, however, is not immediate. It follows a series of notices and warnings, allowing you the opportunity to settle your debt before the IRS takes action. Unfortunately, once the process begins, the IRS can be relentless.

Asset seizure is a serious step taken by the IRS, and it’s typically a last resort, employed only after other attempts to collect the tax debt have failed. Understanding how this process works, what leads up to it, and your rights during the process is critical to protecting your assets and maintaining control over your financial future.

Understanding Tax Levies and Asset Seizure

A tax levy is the legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a legal claim against property to secure payment of the tax debt, while a levy actually takes the property to satisfy the tax debt. When you don’t pay your taxes, the IRS may levy, seize, and sell any type of real or personal property that you own or have an interest in.

For a levy to occur, the IRS must first assess the tax and send you a Notice and Demand for Payment. If you neglect or refuse to pay the tax, the IRS will send a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing at least 30 days before the levy. You can ask an IRS manager to review your case, or you can file an appeal with the Office of Appeals if you believe the levy is unjustified.

It’s essential to understand that levies are not the first step in the collection process. The IRS uses levies only when other methods such as a payment plan or an Offer in Compromise have been unsuccessful, or you haven’t responded to other IRS attempts to collect the debt.

What Property Can The IRS Seize?

If you fail to pay your back taxes, the IRS has the authority to seize a wide range of property to satisfy your tax debt, including:

  • Vehicles, such as boats, motorcycles, and cars
  • Homes & real estate
  • Wages
  • Retirement accounts
  • Bank accounts (including savings accounts)
  • Jewelry
  • Artwork
  • Life insurance policies
  • Social Security benefits
  • Tax refunds (tax offset)

However, not all property is eligible for seizure. The IRS cannot seize certain items, such as unemployment benefits, certain annuity and pension benefits, disability payments, and workers’ compensation, among others. Additionally, the IRS usually avoids seizing primary residences and prefers to target other assets.

Understanding the breadth of what the IRS can seize is essential in appreciating the seriousness of tax debt. It’s not just tangible property; it can also be money you haven’t yet received, making it crucial to address tax liabilities promptly.

How The IRS Determines Which Assets to Seize

The IRS doesn’t seize assets indiscriminately. The agency has a process to determine which assets to seize to satisfy the tax debt while causing the least amount of financial hardship to the taxpayer.

First, the IRS will assess your financial situation, including your income, assets, and expenses. They will also consider your response to previous attempts to communicate and collect the debt. The IRS aims to collect the debt as quickly as possible, so it will target assets that can be easily liquidated.

If you have multiple assets, the IRS will choose those that are easiest to sell and that will cover as much of the debt as possible. This decision-making process is another reason why it’s beneficial to work with the IRS to come to a payment arrangement that’s more manageable for your circumstances.

Protecting Your Assets From IRS Seizure

The most effective way to protect your assets from IRS seizure is to be proactive about your tax liabilities. If you cannot pay the full amount, consider setting up a payment plan or negotiating for an Offer in Compromise. It’s also essential to file your tax returns on time, even if you can’t pay the taxes due, as the failure-to-file penalty may be more than the failure-to-pay penalty.

Another step you can take is to ensure that the IRS has up-to-date information about your financial situation. If your circumstances have changed and you’re unable to meet your payment arrangement, contact the IRS to discuss your options.

Lastly, if you’re facing a potential asset seizure, consult with a tax professional immediately. They can help you understand your rights, work with the IRS on your behalf, and potentially prevent the seizure of your assets.

What to Do If The IRS Seizes Your Assets

If the IRS has already seized your assets, it’s not the end of the road. You have options, but it’s crucial to act quickly. Firstly, you should immediately review the notice of seizure to understand why the assets were taken and the amount of tax debt the IRS is seeking to collect.

Next, contact the IRS to discuss your case. If you believe the seizure was in error, or if it creates an economic hardship, you can appeal the seizure with the IRS Office of Appeals.

In any case, seeking the assistance of a tax professional who understands the intricacies of tax law and IRS procedures can be invaluable. They can guide you through the process, represent you in dealings with the IRS, and help you to recover your assets or reach the best possible resolution. For a free consultation and case review, contact Tax Defense Network at 855-476-6920.