Many citizens aren’t exactly clear on what the IRS seizures can legally take from them.
If you owe back taxes, then what will happen? Will you go to jail for not paying taxes? Will you lose everything you have? In this post, we’ll explain which assets the IRS can or cannot seize.
First, let’s check the difference between levy and seizure.
IRS Levy: This is when the IRS takes money from your paycheck or bank account to pay your tax debt.
IRS Seizure: This is when the IRS takes and sells your personal property, like your house or car, to pay your tax debt.
| Aspect | Levy | Lien | Seizure |
| Action | Involves taking property or funds. | Is a claim against property. | Is the physical taking of property. |
| Purpose | To collect unpaid taxes. | To secure the government’s interests. | To enforce collection through asset liquidation. |
| Process | Can occur after a notice and demand for payment. | Arises when you fail to pay taxes after a demand. | Follows a levy if other methods fail. |
Now, we’ll learn more about the IRS property seizure process:
First of all, the IRS gives you a warning. Levy or seizure is the last resort when you can’t pay your debt. After sending a “Notice of Demand for Payment,” the IRS waits for a response. If you ignore it, the IRS issues the “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.”
The IRS delivers the final notice directly to you, leaves it at your last known address, or sends it by registered or certified mail. In 30 days, you can request an appeal or make a payment arrangement. If you don’t, the IRS will take your assets.
The IRS sets a “minimum bid” for the sale. They share this amount with you, along with the fair market value and sale notice. The IRS then publicizes the sale through newspapers, flyers, or online. They usually wait at least 10 days after the notice before selling your property.
Can the IRS seize your assets? Can the IRS take your house if you owe taxes?
Yes and yes. The IRS can legally seize your assets (cars, houses, bank accounts, etc.) to collect taxes you owe.
Which assets can the IRS seize?
Any valuable assets can become cash, so the IRS can seize them. These items are sold at a public auction for tax debt repayment after your last chance to reclaim them.
- Properties, such as houses, vacation homes, or other real estate.
- Vehicles, boats, expensive jewelry, or other personal assets.
- Bank accounts
- Retirement account
- Saving accounts
- Life insurance
- Wages
What about smaller tax debts? If your tax debt is under $5,000, the IRS may not take and sell your assets. Instead, they might collect by taking your federal tax refunds and a part of your salary.
When the IRS puts a levy on your salary, they usually take only a part of your paycheck. It continues until you pay off your debt or the levy is removed. However, by law, the IRS can only take a part of your wages, based on factors like your dependents.
Is there a way to open bank accounts the IRS can’t touch?
An exempt bank account may protect some income from garnishment. Such as Social Security and veterans’ benefits. Federal law recognizes these accounts, with variations in application by state.
Opening a bank account in a state that bans garnishments can also be an option. Some states block creditors from garnishing bank accounts. This lets debtors keep cash for living expenses and legal bills.
The IRS freezes financial accounts if you owe taxes or ignore the notices and letters. Contacting the IRS to set up a payment plan can help resolve issues quickly. If you have a large debt and need help, try our free initial consultation service.
Which assets can the IRS not seize?
The IRS can’t take property or income you and your family need to live. Here are the items they can’t seize:
- Work tools at or below a certain amount
- Personal assets at or below a certain amount
- Furniture valued at or below a certain amount
- Unemployment benefits
- Some disability payments
- Clothes
- Textbooks
- Court-ordered child support payments
- Unemployment benefits
- Workers’ compensation benefits
- Some pension or annuity benefits
How can you protect your assets from being seized by the IRS?
- First, contact the IRS after receiving a notice from them. Explain your financial situation and learn about alternative ways for payment. If you don’t respond to their notice, the IRS will continue with its process. Besides, relief from levy or IRS seizures is possible under specific conditions. Even though your debt may be forgiven, for example, due to incurred high medical bills, you have to prove that.
- You can request an appeal through the Collection Appeal Program if the IRS hasn’t seized your funds or property yet. Besides, you can also ask for a Collection Due Process Hearing or an Equivalent Hearing. Check out Publication 1660 to better understand your appeal rights.
- You also have redemption rights after the seizure and sale of your real estate. After the IRS sells your real estate, you or any stakeholder can redeem it within 180 days of the sale.
What happens if the IRS seizes your property?
When the IRS seizes your property for tax debt, they sell it and use the money to pay your taxes. Before the sale, they set a minimum bid price, inform you about it, and allow you to challenge their valuation. They advertise the sale, wait at least 10 days, then sell the property. The sale proceeds first cover the costs of seizure and sale, then your tax debt. If there’s extra money left, the IRS informs you on how to get a refund.
How long does it take the IRS to seize property?
After a “Final Notice of Intent to Levy,” the IRS gives you 30 days to respond. If you ignore it during 30 days, the IRS can legally seize your property. This means, the IRS physically takes your property.
How do I get my seized property back?
You can contact the IRS to resolve your tax liability and request the release of the seizure. The IRS might release the seizure if it’s causing you immediate economic hardship. However, if they deny your release request, you can appeal either before or after they seize and sell your property. Remember, releasing a seizure doesn’t exempt you from paying the due balance, and the IRS can reissue a seizure if the debt remains unresolved.
Need help?
An experienced tax attorney may get the best results for you. You can always reach us to discuss your options, such as not losing an important property or taking advantage of a tax exemption or deduction.
Call now for a free consultation.
Frequently Asked Questions
An IRS seizure is a legal action taken by the IRS where they take possession of a taxpayer’s property to satisfy a tax debt. This happens after other collection attempts fail. The IRS sells the seized property and uses the money to settle the tax debt.
The IRS will inform you before seizing property for unpaid taxes. First, the IRS usually sends various notices. These warn the taxpayer and offer chances to pay or settle their debt. Seizure is a last resort. And the IRS only uses it when other methods to resolve the tax liability have failed.
The IRS can seize homes for tax debts, but it’s rare and done as a last resort. They don’t want to make taxpayers homeless. They try other ways to collect taxes first.
Here you can follow news releases for the current month.
Yes, the IRS can seize inherited property for unpaid taxes after following its standard process of notices.
Mostly, they don’t. However, they may seize your 401(k) depending on the state in which you live. Please contact us for details.
Yes, the IRS can seize your house or assets if your spouse owes back taxes. But this generally happens only if you incurred the tax debt in a year when you filed a joint tax return.
First, check your email because the IRS sends a Notice of Tax Lien. Besides, you can directly call the IRS to ask about any liens. Or you can contact your local county records office or clerk’s office in the location of the property. Lastly, tax liens may appear on your credit report, although newer liens may not be reported due to changes in credit reporting laws.
A federal tax lien on real property lasts until the taxpayer pays the tax debt or the 10-year statute of limitations expires. But certain actions can extend this period. The IRS releases the lien within 30 days after settling the debt or before the statute expires.
