There will be many circumstances or periods where you will owe the IRS money. If you are unable to pay and have avoided paying the IRS, you may be subject to seizure, which is the IRS right to obtain your personal property in payment for your past due balance.
Items that the IRS can collect in lieu of past due funds include your vehicle, home, boat, or other personal property in your possession. They can also claim property that is not in your possession, such as wages, IRA accounts, retirement funds, or bank account funds. The IRS will contact you if you owe funds that are overdue, typically several times before taking further action.
Collection
First the IRS will send a notice that the amount is due, with instructions on how to pay. If they have sent you notification and have not received an answer or payment, they will send you a notice that tells you a levy will take place if there is not further action on your part. This levy is the seizure of property.
Due Process
In the final notice, the IRS will give instructions on how to request a Due Process Collection Hearing. If you wish to pursue this, a CPA like Mitch Heifler can help you dispute the collection total, and find the supporting paperwork to support this dispute.
Liens
Before seizing property, the IRS may put a lien on your property, which means that any major property item you sell is automatically paid to the IRS instead of to you.
Levy or Seizure
Finally, the IRS will seize your personal items. This could include business items, cars, boats, houses, or wages and bank accounts. It could also be as simple as the IRS taking your refund for the following year. When the IRS seizes a bank account, the bank has 21 days to hold the funds, before releasing them to the IRS. This allows the account to gain any interest that may apply toward the balance after the 21 days.
There are measures you can take to prevent seizure of your property. The most important thing to remember is that the IRS is like any other debt collector in that they value communication. If you receive a letter stating that you are overdue on a payment to the IRS, seek a professional to assist you in making a payment arrangement that you are comfortable with. They will do this by filing paperwork that requests a determined payment arrangement. The IRS will then respond and approve or deny the arrangement.
If you are past the point of a payment arrangement and you disagree with the amount owed, you need to schedule a Due Process Collection Hearing. This Hearing will determine whether you owe the amount requested. For example, if you claimed expenses that the IRS determined were invalid and therefore ended up with a balance to the IRS, you can claim a hearing that will give you the opportunity to provide additional proof of these expenses. Just keep in mind that once you receive a notice of levy or seizure, you only have 30 days to request a hearing, so be sure to visit a CPA to gather more information about the proper steps you need to take.
Other reasons for calling a hearing would be bankruptcy, or an expiration of the statute of limitations for the IRS to seize your property. The IRS has ten years to collect a debt, so if they send you a levy or notice of seizure after eleven years, you may have a valid case for expiration, even if the debt was originally true. If your spouse is the party who owes money to the IRS, there are rare cases when you would not be held responsible, although the best way to indicate this is at the time of filing.
If the IRS officer appears to collect your property, they are entitled to take every item in a public area (i.e. a business). They will have to request access to any private areas, and if denied, return with a Writ of Entry. They will only pursue this if the debt cannot be settled by the items seized in public areas, and you are denying access to private areas. This document must be obtained through legal process, so unless you have a high outstanding debt, it is unlikely to be pursued.
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