IRS Seizure of Assets

If you are unable to pay taxes that you owe, you should make an immediate effort to voluntarily contact the Internal Revenue Service (IRS) and work out a payment plan, and/or seek a way to otherwise resolve the debt.  If you fail to do so, the IRS will involuntarily collect the taxes from you, which may include the seizure of your assets.  The IRS has more power than any other creditor to seize assets.  Therefore, if you don’t voluntarily make arrangements to pay your taxes, the IRS may seize your assets.

Unpaid Income Taxes and Asset Seizure

Technically, the Internal Revenue Service (IRS) can seize just about any asset that you own, including your primary residence.  However, the Taxpayers’ Bill of Rights strongly discourages the IRS from seizing your primary residence for unpaid taxes, although seizing your second home or a rental property is much more likely to occur to settle tax debt.

The law also considers any income that you have to be assets.  Therefore, if you have income from any source, such as wages from your employment, Social Security disability or retirement benefits, or pension payments, the IRS may take at least a portion of your income and apply it toward your outstanding tax bill.

Likewise, the IRS can seize other assets of value, such as your bank accounts, stocks and bonds, and even valuable personal property.  After seizure, the IRS may sell your property and use the proceeds as an IRS tax debt settlement.

The Asset Seizure Process

One of the first steps that the IRS may take in terms of seizing your assets might be to file a Notice of Federal Tax Lien and place a property tax lien on your property.  This notice allows the IRS to make a priority claim to your property as one of your creditors, and is particularly important in certain situations, such as where you are filing for bankruptcy, and/or you intend to sell your property.

The IRS can also use a tool called a Notice of Levy in order to involuntarily collect taxes from you.  By issuing a Notice of Levy, the IRS can legally take your property, sell your property, and use the proceeds form the sale of your property to pay your tax bill.  The IRS can take almost any type of asset from you pursuant to a Notice of Levy.

Additionally, if you file a tax return in the future and are entitled to a federal and/or state tax refund, those refunds will be applied to your outstanding IRS penalties and interest that you are liable for until it is paid in full.

How to Fight Asset Seizure Due to Unpaid Taxes

The best way to fight the seizure of your assets is to voluntarily work with the IRS to resolve your tax liability as soon as possible.  If you do so, the likelihood of the IRS seizing your assets due to unpaid taxes is much lower.  For instance, you can propose an installment agreement for the payment of your taxes over time.  You might incur penalties and interest if you are unable to pay your tax debt all at once, but you can potentially avoid the seizure of your assets from an IRS tax problem.

Likewise, you may be able to reduce your tax debts through the offer in compromise process.  While this may not be the easiest option, you might be able to reach an agreement with the IRS to reduce the total amount of tax debt that you owe, based on your individual circumstances.  Again, entering into an offer in compromise may allow you to avoid asset seizure altogether.

Finally, filing for bankruptcy can impact your ultimate tax liability, and/or permit you to pay your tax debt over a certain period of time without incurring further interest and/or penalties.  Plus, bankruptcy laws guarantee that you are able to retain a certain amount of assets, which would protect those assets from seizure, even by the IRS.