An IRS seizure is one of the most frightening things that can happen to a taxpayer. If you are behind on your taxes, you may be wondering if the IRS can take your house.
The answer is yes…but there are a few things you need to know before they can do that.
In this article, we will explain everything you need to know about an IRS seizure, including how it happens, what happens to your property, and what you can do to stop it.
Can the IRS take your house?
The IRS has the legal right to seize people’s property if they refuse, neglect, or fail to pay their federal income taxes.
The IRS has a variety of methods to collect money. The most severe action the IRS may take is to impose an income tax lien on your property.
If you’re behind on your taxes, you need to understand levies and how to avoid them.
When does the IRS seize property
The IRS must go through a three-step procedure to lawfully take your assets, with certain exceptions.
IRS seizure process
Before placing a levy, the IRS must provide you with written notice and follow all legal requirements.
The following are some of these stages to ensure that the IRS notifies you correctly and follows the rules:
- The IRS issues a “Notice of Demand for Payment.” In other words, the IRS delivers you a tax demand.
- You do not respond to the IRS when they ask for payment.
- The IRS sends you the “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.”
Notice of seizure of property
The final notice is delivered to the taxpayer in person, left at their previous address, or sent by registered or certified mail.
If you do not appeal or pay your IRS tax bill within 30 days, the penalty will be applied. You have 30 days to appeal or make payment arrangements after this date. If you don’t take action within 30 days, the IRS may start seizing your assets.
The IRS does not have to give you a hearing at least 30 days before seizing property if you meet one of the following conditions:
- The IRS believes the collection of taxes is in danger. A jeopardy levy is a term used by the IRS to describe this situation.
- The IRS has the power to seize your state tax refund (with a CP504, which is not a final Notice of Intent to Levy)
- The IRS places a lien on a federal contractor’s property to collect unpaid taxes.
- A DISL or Disqualified Employment Tax Levy is a formal demand for payment of taxes that someone has failed to pay.
Even with these exceptions, the IRS must notify you of your appeal rights after issuing a levy.
What assets can the IRS seize?
IRS may seize your personal belongings and real estate even if you do not have them in your physical possession. For example, the IRS can take your boat if you store it at a friend’s house.
The IRS may also get your money if you’re self-employed. The agency can take your money, including wages, payments from clients, rent income, funds in your bank account, and retirement savings.
The IRS reaches out to the party holding your money and instructs them to send it straight to the IRS.
The IRS can seize virtually everything you own, including your house. You’ll be allowed to keep a few personal belongings, tools of the trade for work, and livestock if applicable. Go here to figure out if your wages are exempt from an IRS seizure.
What assets can the IRS not seize?
The IRS can seize various income, wages, and assets. However, there are a few things the IRS will not levy:
- Minimum exemption for salaries and other income
- Unemployment benefits
- Worker’s Compensation
- Income for court-ordered child support payments
- Annuity and pension payments
- service-connected disability payments
- “Job Training Partnership Act” assistance
- Tools necessary for trade, business, or profession up to a specific value
- Furniture and household items up to a certain amount
- Principal residence in most cases because it requires a U.S. District Court judge to approve the sale
How to Request a Collection Due Process Hearing
If you receive a letter notifying you of an IRS levy, you may appeal by requesting a Collection Due Process (CDP) hearing. You must fill out IRS Form 12153(Request for a Collection Due Process or Equivalent Hearing).
Consider consulting a tax expert to assist you in the appeal.
At the hearing to challenge the IRS’s seizure of your property, you argue why it should not be done. You may also dispute that the IRS incorrectly calculated taxes or that you already paid them.
You may be able to bring forward your current or ex-spouse’s arguments if you feel that they should only have to pay the tax. A tax expert can assist you in finding other reasons for the appeal.
The Office of Appeals will decide your case after attending your CDP hearing. If you disagree, you have 30 days to submit another appeal.
How to stop the Levy on Your Wages, Tax Refund, or Bank Account
If the IRS levies or garnishes your wages, it stays in place until you pay the amount owed in full. The IRS will also keep all tax refunds and apply them to your outstanding tax balance while this is happening.
If the IRS orders your bank account to be seized, the funds are frozen for 21 days.
The IRS then receives the money from the bank. To stop the seizure, you must reach an agreement or resolution with the IRS during the 21-day waiting period.
How an IRS Property Levy Works
When the IRS decides to take your property, a revenue officer arrives at your home or business. They start by removing items from public areas first. For example, they may remove automobiles parked in front of your house.
They’ll ask to visit your home or company’s private areas. If you agree, they will enter those spaces (garages, houses, and so on) and seize the things found there.
If you don’t allow the revenue officer entry to your home, they will obtain a Writ of Entry.
This is a legal document similar to a warrant that is obtained from the courts. It gives the revenue officer standing permission to enter your home or company in order to seize assets.
Getting IRS Asset Seizure Help
If you get a letter of intent to levy, contact the IRS or a tax professional as soon as possible to handle the situation on your behalf.
It’s also a good idea to submit a CDP hearing request in response to the IRS notice.
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