NATIONALLY RECOGNIZED FEDERAL LAWYERS
Last Updated on: 23rd September 2023, 09:38 pm
How to Respond to Threats of IRS Asset Seizure or Levies
Getting a notice from the IRS about a potential levy or seizure of your assets can be scary. But don’t panic! There are steps you can take to respond and protect your property.
What is a Levy or Seizure?
A levy is an administrative means for the IRS to collect taxes by seizing and selling your property to pay off tax debts. Basically, it allows them to take your stuff. An IRS levy permits the legal seizure of property like:
- Bank accounts
- Rental income
- Retirement accounts
- Life insurance cash value
- Boats, cars, houses, etc.
The IRS can’t just show up and take your things unannounced. They have to go through due process by sending notices explaining how much you owe, when it’s due, and how to pay it. If you don’t respond or make payment arrangements, that’s when they can move forward with a levy.
Responding to an IRS Levy Notice
If you get a notice saying the IRS intends to levy your property, don’t ignore it! You typically have 30 days to respond before they can take action. Here’s what to do:
- Open the notice right away – the response timeframe starts when the IRS sends it, not when you receive it.
- Read everything carefully to understand what specific property they intend to levy.
- Contact the number on the notice immediately to discuss payment options. The IRS may release the levy if you can pay the amount owed or agree to an installment plan.
- Consider hiring a tax professional to help negotiate with the IRS on your behalf.
- Request a Collection Due Process hearing within 30 days to appeal the proposed levy action.
- Act quickly because the IRS can seize assets on day 31 if you don’t respond.
Collection Due Process Hearing
A Collection Due Process (CDP) hearing allows you to appeal a proposed levy and explain why you disagree with the IRS’s intended collection action. Some reasons to request a hearing include:
- You think the amount the IRS says you owe is wrong
- You didn’t get the opportunity to discuss payment options
- Paying the amount due would cause significant financial hardship
- You have reason to believe the collection action is unfair or inappropriate
To request a CDP hearing, complete and return Form 12153 within 30 days of receiving a levy notice. The IRS will then work with you to schedule a time and date. CDP hearings are typically conducted over the phone or through written correspondence. You’ll have the chance to present evidence supporting your reasons for appealing.
In some cases, a CDP hearing can temporarily stop the levy process while your appeal is evaluated. However, the IRS may still seize assets if they believe the collection of tax is at risk – so don’t count on the hearing itself stopping the levy.
What Happens After Assets Are Seized?
If you exhausted all options and the IRS did go ahead with seizing your property, don’t panic. You may still be able to get your money or assets returned by taking quick action:
- For bank account levy funds, file an IRS Form 12294 within 21 days of the levy release date.
- For seized physical property, file an administrative return of property claim within 30 days of the seizure date.
- Show reasonable cause for returning the assets, like economic hardship.
- Work with the Taxpayer Advocate Service for help returning levied property.
The IRS may return the levied assets if the seizure caused significant hardship that impairs your ability to meet necessary living expenses. But if they believe returning the property would jeopardize future collection of tax, they likely won’t reverse course.
Avoiding IRS Property Seizures
The best way to avoid having your property seized by the IRS is to prevent tax debts from occurring in the first place. Some tips:
- Pay all taxes you owe on time
- Request an extension if you need more time
- Stay organized with good recordkeeping
- Review returns carefully before filing
- Pay estimated taxes quarterly to avoid penalties
- Contact the IRS immediately if you receive a notice of underpayment
- Consider hiring a tax professional for complex returns
But if you do slip up and get behind on taxes owed, take IRS notices very seriously. Communicate with them right away to discuss payment plans or other options. With prompt action, you can often resolve tax debts before they ever get to the point of having your property seized.
Dealing with the IRS can seem intimidating, but knowledge is power. Now that you understand the levy and seizure process and how to protect your rights, you can handle any notices confidently. Pay attention to response timeframes, and don’t be afraid to ask for help from a tax pro, the Taxpayer Advocate Service, or the IRS directly. Open communication and quick action are key for resolving tax issues before they escalate.