What can the IRS seize when you owe back taxes?

February 27, 2020 by Robin Scott-Hutchens, EA
Cash with a metal chain and lock wrapped around it

If you owe back taxes to the IRS, you may find yourself worried about the day the people in suits with skinny black ties show up and start hauling things away. What can the IRS seize? Two words: almost anything. Wages, retirement accounts, bank accounts, vehicles, houses, furniture, and even passports are all fair game. All these things are subject to seizure if your back taxes owed amount is large enough and has existed long enough.

It doesn’t have to come to this, however. There are plenty of methods to employ beyond simply writing a check for the balance due to prevent this from happening. The idea is to communicate with the IRS that you fully intend to pay, but you may need some assistance with doing so. Once you’ve worked this out – make your payments!

Let’s look at how the IRS will treat a tax balance due. First, they will send a bill to you that includes interest and possible penalties. If the first bill is not addressed in some manner, they will send at least one more bill. Remember that penalties and interest will continue to accrue. Finally, if the additional bills go unpaid, the IRS will start collection actions.

If you have reached the collection stage, one of the first things the IRS will take is any federal or state refund that may be coming to you. Even if you are currently making payments to the IRS under an installment agreement, they can seize your refunds and apply it to your balance. Look how helpful they are!

Beyond snagging your refund, the IRS may then start with a Federal Tax Lien. This attaches to any current and future property as well as wages and bank accounts. A Notice of Federal Tax Lien notifies not just you but also your creditors or anyone else that the IRS has now laid claim to these items. So, let’s say you have a federal tax lien on your home, and you sell it. The IRS will get their share of your proceeds first. They will be able to take your wages to a certain extent, yet they can’t take every penny of your paycheck. You do have some protections against that.

After all of this, if you still have not made efforts to work with the IRS to pay your tax debts, the IRS may then levy your property, which means seize your property. The reason the IRS seizes property is so they can then sell it to recoup the taxes you owe. The IRS will send a Final Notice of Intent to Levy before proceeding with the actual levy and the tax man shows up at your doorstep, though, and they will only seize property they feel will have net proceeds to apply toward your balance due. For example, they may levy your bank account which would allow them to remove all the money from your account on the date of the levy.

If this has you feeling like you want to get out of town or the country, be warned that if you owe more than $51,000 including penalties and interest, the IRS may alert the State Department. This will block the renewal of your passport and may even result in the confiscation of the passport you currently hold.

Keep in mind that the more you owe and the longer you owe it, the more likely it is the IRS will resort to more drastic measures. But it takes a while to get there, and there are many ways to address your taxes due before it gets to this point. IRS’s Publication 594 contains a lot of information about the entire collection process.

Communication with the IRS is important and a key component to avoiding any sort of levy or seizure. Working out an installment agreement or offer in compromise may be your first step. Maybe your account qualifies for Currently Not Collectible status. An IRS agent can help you determine that. The point is that there needs to be communication. If the IRS feels that you are cooperating and making an effort to pay your taxes, regardless of how large the debt is, they are less likely proceed with a levy.

The prospect of communicating with the IRS can seem like an impossible task in and of itself. There are services that will step in and present you with options. Some will work with the IRS on your behalf. Be sure to do your homework on these services though. You want to be able to rest easy in knowing that you are working with credentialed professionals who have a strong working knowledge of taxes and the collections process. TaxAudit’ s tax debt relief service provides honest and fair options for your situation. If you find yourself in any stage of the process listed above, do not hesitate to reach out. A clear description of the services and initial pricing as well as possible options to address the balance due can be found at https://www.taxaudit.com/tax-debt-relief-assistance. The sooner you act, the more options you have. Ignoring the bill will not make it go away, but it may make your paycheck and belongings go away. Find some assistance before it gets out of hand.

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Robin Scott-Hutchens, EA
Corporate Trainer

 

Robin Scott-Hutchens is an Enrolled Agent who has worked in the tax industry for over a decade.   She has a Bachelor of Science degree in Accounting.  Her love of taxes has led her to prepare taxes with large corporations as well as private practice.  She joined TaxAudit in 2016 as an Audit Representative where she enjoyed working with taxpayers to help them navigate the stressful landscape of being audited.  She then moved to the Learning and Development Team at TaxAudit, where she now serves as a Corporate Trainer.  When she is not preparing tax returns or teaching tax concepts, she enjoys reading and writing about taxes, being outdoors, and petting any dog that will allow her to do so.


 

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