The Internal Revenue Service (IRS) is legally responsible for collecting federal taxes in the United States. Every tax payer understands that dealing with the IRS can be stressful, to say the least. One question that often comes up is if the IRS can seize property to satisfy a tax debt. In simple terms, yes, the IRS has the authority to seize property, however, this process isn’t its first choice. In this article, we will discover why the IRS seizes property as well as other ways it tries to satisfy a tax debt.
Before the IRS moves to seize property, there has to be a history of unpaid taxes. This can be in the form of payroll taxes for your business, income taxes, or income taxes. The IRS will notify you about your tax debt through letters and they generally give you an opportunity to resolve your debt through various means. It is only after these means have been exhausted that the IRS moves to property seizure.
The IRS can also take money from your bank account through a bank levy. The agency will notify your bank to freeze your account, and then they'll take the money to cover your tax debt.
In certain instances, the IRS might accept a reduced amount to settle your debt. This is called an Offer in Compromise. However, it isn’t easy to qualify for, and you'll need to demonstrate genuine financial hardship.
If you're employed, the IRS can take a portion of your wages directly from your paycheck until your debt is paid. This is known as wage garnishment.
If you are unable to pay your tax bill in full, the IRS might allow you to set up an instalment agreement. This lets you pay your debt in smaller, manageable chunks over time.
As a last resort, the IRS can seize your assets, including your home, car, or other valuable possessions, and sell them to satisfy your tax debt.
Property seizure is a measure of last resort for the IRS. The agency will typically only consider this option if:
You have repeatedly ignored their attempts to communicate.
You have refused to work with them to find a solution.
They believe that seizing your property is the only way to collect the debt.
The IRS can technically seize any property you own, however, they typically target high-value assets. This can include your primary residence, a secondary home, a car, or valuable items like jewellery or art.
While the IRS does have the authority to seize property, there are steps you can take to protect your assets:
If you're struggling to pay your taxes, the best thing you can do is communicate with the IRS. Ignoring their letters or calls will only make matters worse. Clearly explain your situation and explore options for repayment.
As mentioned earlier, setting up an instalment agreement can be a viable way to pay off your tax debt over time without losing your property.
Tax laws are complicated and navigating them can be challenging. Enlisting the services of a tax professional or tax attorney can help you understand your options and create a strategy to resolve your tax debt.
In some instances, filing for bankruptcy might provide protection from IRS property seizure. This is a complicated legal process, so consult an attorney before considering it.
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Pat Raskob