Under IRS tax law, what property can and cannot be seized?

In Austin and the nearby areas, when a person is informed that he or she has outstanding tax debt, one of the biggest concerns is that their property will be seized by the Internal Revenue Service to satisfy it. A lien can be placed on the person’s property. If the tax issue is not addressed through a payment plan, a successful appeal or a discharge, the IRS will likely move forward with a levy. This is when the property will be seized. Obviously, this is a major worry for people who are already confronted with challenges about their debt. Taking steps to avoid a levy starts with understanding what it is and the property that can and cannot be seized.

Understanding a levy and its basic rules

The IRS will do whatever it can to recover what it says it is owed. A levy will take a person’s property to satisfy the debt. That may include a home, a motor vehicle, income, retirement payments and Social Security. It is important to remember that the IRS will only move forward with a seizure under certain circumstances. That includes the taxes being assessed and the person having been billed; the person refusing to pay what is owed; and a final notice being sent to the debtor saying that a levy is pending.

When the final notice is sent, there will also be information about how to have a hearing 30 days before the seizure is initiated. The IRS is not obligated to give those 30 days in some cases. These include the IRS believing it will not collect the tax without immediate levy; the levy is to collect from a refund the debtor was set to receive; it is for a debt owed by a federal contractor; or there is a DETL (Disqualified Employment Tax Levy) and there was a past appeal within two years.

Property that the IRS will and will not seize in a levy

It is relatively straightforward as to what properties can be seized as part of a levy. There are subsets to the rules. There can be only one levy against wages, salary and other levels of compensation through work. It is ongoing until the debt is paid or the debtor comes to an agreement with the IRS. Bank accounts are an obvious target for seizure as are other financial benefits packages. For those who own a home, a tax levy can result in it being taken and sold. If the property is worth more than what is owed, the debtor will receive a refund for the remainder. Still, it is wise to find alternatives to losing a home to cover a tax debt.

With the current health situation, unemployment benefits are a primary concern. These cannot be seized in a levy. Also, public assistance, workers’ compensation and other benefits are exempt. The IRS will not take furniture, essential items like schoolbooks and clothes, household items, tools of a trade and other fundamental properties.

Legal assistance for addressing tax challenges

Tax problems can come up without warning due to a sudden personal challenge or it can take years for it to incrementally get worse before the IRS comes calling. The immediate and understandable response to being confronted with potential enforcement actions from the IRS is to feel fear and worry about the future. While the IRS has the legal right to take many actions to satisfy tax debt it claims a person owes, there are ways to negotiate a workable solution and avoid property being levied.

There could have been mistakes when filing or the IRS could be trying to seize property in error. A variety of strategies can help to reduce the tax debt, pay it and prevent levies from moving forward. An appeal might even be successful. Before contacting the IRS or accepting a levy, a legal firm can analyze the case and may be able to help with this or any other aspect of IRS tax law.