If you have just
received a notice from the Internal Revenue Service (IRS) stating that they
intend to enact a tax levy, you’re going to be alarmed. Your biggest questions
will likely be “Can they actually do this?” and “What can they take?”

What Assets Can the IRS Legally Seize to Satisfy Tax Debt?

The answer to the
first question is “Yes.” When you owe back taxes, the IRS can legally seek
payment by seizing any property equal to the value of your tax debt.

This is an
extreme measure that is only taken after repeated warnings fail to result in
the money owed or an acceptable payment arrangement. You will receive letters
first. Then the IRS will impose a tax lien on any
real estate you own to prevent you from selling it before the tax debt is paid
in full. If none of these steps enable it to recover your unpaid assets, the
next stage of the collection process is to levy your assets.

Let’s take a
closer look at the answer to the second question. What can the IRS seize once a
tax levy takes effect?

the IRS Can Seize

Assets the IRS Can Seize

The IRS can seize
practically any asset that has value/equity and can be liquidated into cash.
This includes real estate, cars, jewelry, and even the investments you made to
give yourself a comfortable retirement. These items are usually sold at a
public auction before you have the chance to reclaim them, with the proceeds
applied to your tax debt.

Some of the
assets that can be seized and sold include:

  • Motor vehicles such as cars,
    trucks, RVs, motorcycles, and boats
  • Vacation homes
  • Properties you own in addition to
    your primary reside
  • Expensive jewelry
  • Life insurance policies
  • Savings accounts and retirement
  • Some types of government benefits

In general, any
asset that is not essential to your survival and shelter (and that of your
family) may be seized to pay the IRS what you owe.

With smaller tax
debts (under $5,000), your assets may not be seized and sold, but the IRS will
still try to collect by intercepting your federal income tax refunds and
garnishing your wages. If it takes the latter option, it does not have to seek
a court order first: the IRS can simply commence the garnishment process and
even take a higher percentage of your income than other creditors are allowed
(up to 65% of nonexempt earnings). The levy against your wages will only be
released after your account is satisfied.

Types of income
subject to garnishment include:

  • Your employment paychecks
  • Unemployment benefits
  • Worker’s compensation payments
  • Public assistance or welfare
  • Social Security benefits

the IRS Can NOT Seize

Assets the IRS Can NOT Seize

Although its
powers of seizure are broad, the IRS cannot legally take claim to property and
income sources that you need for your family’s survival. Property immune from
seizure includes:

  • Clothing and schoolbooks
  • Work tools valued at or below
  • Personal effects that do not
    exceed $6,250 in value
  • Furniture valued at or below $7720
  • Any asset with no equitable value
  • Your personal residence if you owe
    less than $5,000

Your Income and Assets

Protecting Your Income and Assets

To prevent your
property from being seized and wages garnished, your best option is to
communicate with the IRS and explain your financial situation. You may be
eligible for a payment arrangement that allows you to repay your tax debt in
monthly installments or an Offer in Compromise, in which you settle your tax
debt for less than the full amount you owe.

If your
circumstances are unusual (e.g., you have incurred high medical bills due to
illness), your debt may be forgiven. Tax debt forgiveness is not common but
remains a possibility if you can prove to the IRS that you have been struggling
with significant hardship.

Dealing with the
IRS can be intimidating, which is why working with an experienced tax attorney
can ensure the best outcome for your circumstances. At Paladini Law, we will
help you find the right solution for your tax debt, whether it be a payment plan, Offer in Compromise, or application
for debt forgiveness.

Attorney Brad
Paladini will give you peace of mind by working to remove any levy on your
assets so that you don’t lose important property that you worked hard to
acquire. For more information, please contact
Paladini Law or call 201-381-4472.

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