Asset Seizure: How Far Does the IRS’s Power Extend?

“Did you ever notice that when you put the words ‘The’ and ‘IRS’ together it spells ‘THEIRS?’” – Author Unknown

Many people are frustrated by the amount of their wages they have to turn over to the Internal Revenue Service in taxes each year, but the fact is, if you do not pay those taxes then the IRS has the power to take much more than that from you.

The IRS has extremely broad powers that they are authorized to use in order to enforce the US tax code. There is some confusion amongst taxpayers over whether or not the IRS can truly seize your assets, and though most cases do not escalate to this extreme, the Internal Revenue Code does give the IRS the power to take your home, your business, or other assets if you do not pay what you owe.

However, when you have outstanding tax debts the IRS cannot just immediately jump to seizing assets. They will first inform you of your unpaid debt and give you a chance to pay. If you do not comply, then the debts will be exacerbated by penalties and interest for things like not filing your taxes or not paying enough taxes.

If you are unable to pay your tax debt, it is usually possible to negotiate with the IRS and work out some sort of settlement or payment plan. The worst thing you can do is try to ignore the problem.

If the IRS finds that you are not cooperating with paying your debt or they cannot communicate with you, they may take the next step of placing a federal tax lien on your property or assets in an attempt to collect what they are owed. A lien is public notice that states you owe taxes to the government, and it gives the government the power to seize any proceeds from the sale of those assets to be used to pay your debt.

Once the IRS has exhausted its other collection methods, it can levy the delinquent taxpayer’s assets. A levy is the actual seizure of assets. The IRS has the power to levy nearly any of your assets with a few notable exceptions being clothing, worker’s compensation, child support, social security, welfare, and enough of your salary to allow you to pay basic living expenses.

The result of levying bank accounts and other financial assets will be the financial institution simply paying over the amounts to the IRS.  After seizing any other assets, the IRS will sell them at public auction.

The IRS has a great deal of power to take action against you when you do not pay your tax bill up to and including the seizure of your assets through levies. However, most situations can be resolved through negotiations with the IRS or even taking more extreme actions like bankruptcy that may allow you to keep more of your property (though most tax debts are not discharged in bankruptcy). If you are a delinquent taxpayer facing action by the IRS, please contact Morgan Maxwell so that you can work to reach an equitable solution to your tax problems.

Written by E. Morgan Maxwell

E. Morgan Maxwell

Since beginning his own firm, Mr. Maxwell has continued a tax-law oriented practice encompassing a wide range of transactions, planning and dispute resolution. His dispute resolution experience includes involvement at all levels of the Internal Revenue Service (Examinations, Appeals, Collections, Office of Professional Responsibility, the U.S. Tax Court), the Pennsylvania Department of Revenue, the Tax Litigation Section of the Pennsylvania Attorney General’s Office, Pennsylvania Commonwealth Court, Common Pleas Court and local taxing jurisdictions in southeastern Pennsylvania.

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