Understanding IRS Levies
The Internal Revenue Service (IRS) possesses the authority to seize personal property in order to satisfy unpaid tax debts. This action, known as a levy, allows the IRS to legally take possession of various assets, including wages, bank accounts, vehicles, real estate, and other personal belongings.
Reasons for IRS Levies
The IRS typically resorts to levies after repeated attempts to collect unpaid taxes have been unsuccessful. Some of the common reasons for an IRS levy include:
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Unpaid Taxes: The primary reason for an IRS levy is the presence of unpaid taxes. If a taxpayer fails to fulfill their tax obligations despite receiving multiple notices and warnings, the IRS may levy their personal property to recover the owed taxes.
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Non-Compliance: Failure to respond to IRS notices or make arrangements to settle the tax debt can result in an IRS levy. This includes ignoring Final Notices of Intent to Levy and failing to provide requested documentation or information.
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Escalation of Collection Efforts: Levies are often employed after an extended process of notifications and warnings. When these warnings go unaddressed, the IRS escalates its collection efforts by seizing personal property as a means of securing the owed taxes.
Types of Property Subject to Levy
The IRS has the authority to seize a wide range of personal property to satisfy tax debts, including:
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Wages and Income: The IRS can garnish a portion of your wages or other income, including salaries, commissions, bonuses, and self-employment income.
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Bank Accounts: The IRS can levy funds in your bank accounts, including checking, savings, and money market accounts.
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Vehicles: The IRS can seize and sell your vehicles, including cars, trucks, motorcycles, and boats.
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Real Estate: The IRS can place a lien on your real estate and eventually seize and sell the property if the tax debt remains unpaid.
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Other Personal Property: The IRS can also seize other personal property, such as jewelry, artwork, collectibles, and equipment.
Consequences of an IRS Levy
An IRS levy can have severe consequences, including:
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Financial Hardship: Levies can significantly impact your financial situation by reducing your income and seizing your assets. This can make it challenging to cover essential expenses and maintain your standard of living.
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Damage to Credit Score: An IRS levy can negatively affect your credit score, making it more difficult to obtain loans or credit in the future.
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Additional Penalties and Fees: The IRS may impose additional penalties and fees on taxpayers who fail to resolve their tax debt after their property has been levied. These penalties can further increase the financial burden on the taxpayer.
Releasing a Levy
If the IRS has levied your personal property, you have options to release the levy. One approach is to negotiate with the IRS to reach a resolution. This can involve setting up a payment plan, submitting an offer in compromise, or requesting a temporary release of the levy due to financial hardship.
Exemptions and Property Protection
While the IRS has broad authority to seize personal property, certain exemptions and protections exist. These exemptions vary depending on your specific situation, such as your income level, the source of the funds, and whether the property is considered essential for your livelihood. If you believe that your property is exempt from levy, it is vital to seek advice from a tax professional or tax attorney.
Negotiating with the IRS
When facing an IRS levy or any other tax-related issue, it is essential to approach negotiations with the IRS strategically. Having a tax attorney by your side can greatly enhance your chances of reaching a favorable agreement.
The IRS has the authority to seize personal property to collect unpaid taxes. This action can have severe consequences for taxpayers, including financial hardship, damage to their credit score, and additional penalties and fees. If your personal property has been levied by the IRS, it is crucial to seek professional guidance from a tax attorney to explore your options for resolving the tax debt and releasing the levy.
I Have a Tax Lien. Will the IRS Seize My House or My Car?
FAQ
What assets Cannot be seized by IRS?
How long does it take for the IRS to seize a property?
Can the IRS take personal belongings?
How common is IRS seize property?
Can the IRS seize your property?
It’s rare for the IRS to seize your personal and business assets like homes, cars, and equipment. In fact, the IRS seized those kinds of property only 323 times in 2017. Common examples are taxpayers who: If you owe taxes and aren’t in an agreement with the IRS to pay them, the IRS can levy your financial accounts or garnish your wages.
What happens if the IRS seizes your money?
The most common “seizure” is a levy. That’s when the IRS takes your wages or the money in your bank account to pay your back taxes. In 2017, the IRS issued 590,249 levies to third parties like employers and banks. It’s rare for the IRS to seize your personal and business assets like homes, cars, and equipment.
Can the IRS seize your assets?
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.
What happens after a property is seized?
What happens after my property is seized? If the IRS seizes your house or other property, the IRS will sell your interest in the property and apply the proceeds (after the costs of the sale) to your tax debt. Prior to selling your property, the IRS will calculate a minimum bid price.