Understanding IRS Seizures: Which assets can be seized - PrecisionTax (2024)

Many citizens aren’t exactly clear on what the IRS 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.

Worried About IRS Asset Seizure?

Facing IRS asset seizure can be daunting. Our team of tax experts can help you understand your rights and explore options to protect your assets.

Understanding IRS Seizures: Which assets can be seized - PrecisionTax (1)
Understanding IRS Seizures: Which assets can be seized - PrecisionTax (2)

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First, let’s check the difference between levy and seizure.

Levy: This is when the IRS takes money directly from your paycheck or bank account to pay your tax debt.

Seizure: This is when the IRS takes and sells your personal property, like your house or car, to pay your tax debt.

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 their 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 can start taking 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?

Yes. The IRS can legally seize your assets to collect taxes you owe.

Which assets can the IRS seize?

Any valuable assets can becomes cash, so the IRS can seize them. Typically, 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. This continues until they remove the levy or your debt is paid off. However, by law, they can only take a portion of your wages considering factors like your dependents.

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
  • Worker’s compensation benefits
  • Some pension or annuity benefits

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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 seizure 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 Equivalent Hearing. Check out Publication 1660 to understand your appeal rights better.
  • You also have redemption rights after the seizure and sale of your real estate. After your real estate is sold by the IRS, you or any stakeholder can redeem it within 180 days of the sale.

What happens after my property is seized?

When the IRS seizes your property for tax debt, they sell it and use the money to pay your taxes after covering the sale costs. Before the sale, they set a minimum bid price, inform you about it, and allow you to challenge their valuation. They advertise the sale publicly, 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 do I get my seized property back?

You can immediately 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?

Working with an experienced tax attorney may provide the best outcome for your situation. 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.

Understanding IRS Seizures: Which assets can be seized - PrecisionTax (2024)


Understanding IRS Seizures: Which assets can be seized - PrecisionTax? ›

You have 30 days to take action from the date of the letter. If you don't respond within this time, the IRS subject to levies or seizures of your wages, other income, bank accounts, personal assets, state and federal tax refunds, social security benefits.

What assets are exempt from IRS seizures? ›

Which assets can the IRS not 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.

What property can the IRS seize? ›

Levying means that the IRS can confiscate and sell property to satisfy a tax debt. This property could include your car, boat, or real estate. The IRS may also levy assets such as your wages, bank accounts, Social Security benefits, and retirement income.

What assets can the IRS not touch? ›

There are only a few types of assets that cannot be seized. The IRS cannot seize real property, and your car cannot be seized if used to get to and from work. You also cannot seize the money you need for basic living expenses. However, all of your other assets are fair game for seizure.

What bank account can the IRS not touch? ›

Certain retirement accounts: While the IRS can levy some retirement accounts, such as IRAs and 401(k) plans, they generally cannot touch funds in retirement accounts that have specific legal protections, like certain pension plans and annuities. 7.

What are considered assets to the IRS? ›

Income is money that is being received, while an asset is money or property that a person is already in possession of. The Internal Revenue Service (IRS) considers most types of income taxable; any income that is not taxable, or tax-exempt, is clearly delineated in the Internal Revenue Code (IRC).

What can the IRS not seize? ›

The IRS can't seize certain personal items, such as necessary schoolbooks, clothing, undelivered mail and certain amounts of furniture and household items. The IRS also can't seize your primary home without court approval. It also must show there is no reasonable, alternative way to collect the tax debt from you.

Can the IRS seize a property with a mortgage? ›

The answer to this question is yes. The IRS can seize some of your property, including your house if you owe back taxes and are not complying with any payment plan you may have entered. This is known as a tax levy or tax garnishment.

Can the IRS take your jewelry? ›

Asset Seizure: What Can the IRS Legally Seize

Under this power, the IRS can seize property such as vehicles, jewelry, artwork, real property, and even a personal residence. No action could cause more trauma than being forced out of your personal residence to repay unpaid taxes.

Can the IRS see your bank account? ›

The Short Answer: Yes. Share: The IRS probably already knows about many of your financial accounts, and the IRS can get information on how much is there. But, in reality, the IRS rarely digs deeper into your bank and financial accounts unless you're being audited or the IRS is collecting back taxes from you.

Can a trust protect assets from IRS? ›

One option to prevent the seizure of a taxpayer's assets is to establish an irrevocable trust. If you are considering placing your assets into a trust to protect them from an IRS levy, it is important that you first consult with an attorney or Certified Trust and Financial Advisor (CTFA).

Can the IRS seize a financed car? ›

People that have auto loans do not tend to have equity in their vehicle (i.e., they owe more money to the creditor than the bluebook value of their car). Thus, in most scenarios where there is a loan on a car, there is absolutely no chance that the IRS or ODR will seize the vehicle.

Can the IRS take money out of your bank account without your permission? ›

So, in short, yes, the IRS can legally take money from your bank account.

Can the IRS freeze my bank account without notice? ›

Warning Signs and IRS Notices

Before the IRS freezes your bank account, they are required to send you multiple notices and warnings. These notices will outline the tax amount owed, the consequences of non-payment, and possible actions that the IRS may take to collect the debt.

How often does the IRS seize property? ›

There's no definitive number for how many homes the IRS seizes each year. The good news is, though, that it's not common for the IRS to seize a primary residence. The IRS can levy other property, such as bank accounts and cars, instead. This is often more proportionate.

Can IRS touch inheritance? ›

Yes, the IRS will move to seize part of the inheritance to satisfy the tax lien.

Can IRS seize inherited property? ›

But as long as probate is not complete, tax problems are definitely valid debts, and the IRS can definitely seize the home BEFORE it is distributed as an inheritance. I just inherited some money and put the check in the bank.

What property is exempt from the IRS levy? ›

Except to the extent provided in section 6334(e), the principal residence (within the meaning of section 121) of the taxpayer and tangible personal property or real property (other than real property which is rented) used in the trade or business of an individual taxpayer.

Can assets in a trust be seized by the IRS? ›

Based on that theory, absent any ill intent or other factors that would allow creditors (including the IRS) to access trust assets, those assets may be protected from a beneficiary's creditors.

Does the IRS seize personal property? ›

An IRS levy permits the legal seizure of your property to satisfy a tax debt. It can garnish wages, take money in your bank or other financial account, seize and sell your vehicle(s), real estate and other personal property.

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