What to Do if the IRS Seizes Your Assets or Property

What to Do if the IRS Seizes Your Assets or Property

Dealing with the IRS seizing your assets or property can be extremely stressful. This article will walk you through the key things you need to know and do if you find yourself in this situation.

Verify the Notice is Real

The first thing you should do is verify that any notice you receive is actually from the IRS. Unfortunately, scammers sometimes send fake notices pretending to be the IRS in order to steal your money or personal information. To verify a notice:

• Call the IRS at 800-829-1040 and provide the notice number, or
• Visit your local IRS office in person.

Never call a number listed on the notice itself, as that could potentially connect you to scammers. Once you’ve verified the notice is real, you can start taking steps to resolve the situation.

Understand the Type of IRS Action

There are a few different ways the IRS can seize assets or property:

• Levy – The IRS can levy (take) money from your bank account or wages.
• Federal Payment Levy Program – The IRS can take up to 15% of certain federal payments like Social Security.
• Seizure – The IRS can physically seize property like cars, equipment, or houses and sell them to pay off tax debt.

Knowing the specific type of IRS action helps you understand your rights and options.

Seek Legal and Tax Help

Dealing with the IRS on your own can be intimidating. Consulting with a tax attorney or certified public accountant (CPA) gives you an expert on your side. They can help protect your rights and identify any possible defenses.

If you can’t afford a tax professional, some offer free or low-cost initial consultations. There are also Low Income Taxpayer Clinics that provide help for free or very low cost.

Request a Collection Due Process Hearing

For levies and seizures, you have the right to appeal and request a Collection Due Process (CDP) hearing. This must be done within 30 days of receiving notice from the IRS by completing Form 12153 and mailing it to the address listed on your notice.

At the hearing, you can argue why the levy or seizure should not happen. For example, you may argue it would create significant financial hardship or that you have defenses to challenge the tax debt. A tax professional can help prepare your arguments and evidence.

Negotiate with the IRS

Rather than appealing, you may want to negotiate directly with the IRS to resolve the situation. For example, you could:

• Request a payment plan to pay off the debt over time
• Make an Offer in Compromise to settle for less than you owe
• Prove the tax debt belongs to someone else, like an ex-spouse

The IRS may release a levy or seizure if you can reach an acceptable agreement. Having professional representation often increases your odds of success.

Take Advantage of Collection Alternatives

If negotiating doesn’t fully resolve the tax debt, the IRS has some collection alternatives that may help:

• Partial Payment Installment Agreement – The IRS accepts reduced monthly payments based on what you can afford.
• Temporary Delay of Collection – The IRS pauses collection for 1 year if it creates a hardship.
• Offer in Compromise – You settle for less than the full amount owed under certain circumstances.

Discuss these options with the IRS or your tax professional.

File for Bankruptcy

As a last resort, filing for bankruptcy may stop IRS collection actions and discharge (eliminate) some types of tax debt. This is a complex process best handled by a bankruptcy attorney.

Be aware bankruptcy does not discharge all tax debts. For example, it does not discharge debts from unfiled tax returns or debts for taxes that were assessed within 240 days of filing.

Retrieve Seized Assets

If the IRS already seized and sold your property, you may be able to retrieve the assets or sale proceeds if:

• The seizure was improper or illegal
• Returning the assets facilitates paying the tax debt
• You enter into an installment agreement with the IRS

You generally have up to 9 months after the seizure to request return of proceeds or assets. An IRS tax attorney can help file the paperwork and improve your chances.

Redeem Real Estate After Sale

If the IRS seized and sold your real estate, you have 180 days after the sale to redeem the property. This involves paying the purchaser:

• The purchase price
• Interest at an annual rate of 20%

After redeeming the property, you can work with the IRS on options to resolve the remaining tax debt.

Request Help from the Taxpayer Advocate

If you’ve tried resolving your issue directly with the IRS without success, the Taxpayer Advocate Service may be able to help. They assist taxpayers who are facing financial hardship from IRS collection efforts.

Avoid Future Tax Issues

After resolving the immediate crisis, take steps to avoid finding yourself in this situation again down the road:

• File and pay all tax returns on time
• Make estimated tax payments if required
• Set aside money to pay next year’s tax bill
• Work with a tax professional to understand your obligations

Dealing with IRS seizures can be scary and overwhelming. Don’t hesitate to seek help from legal and tax professionals. They can help protect your rights and guide you through the process. With the right help, you can resolve IRS collection issues and move forward.

References

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