The seizure of assets is the bluntest tool in the IRS collections arsenal. Under Internal Revenue Code 6331, if a taxpayer refuses to pay any tax owed ten days after the issuance of a notice and demand for payment, then the IRS can collect the tax through a seizure of the taxpayer’s property. Under this power, the IRS can seize property such as vehicles, jewelry, artwork, real property, and even a personal residence. No action could cause more trauma than being forced out of your personal residence to repay unpaid taxes.
The Internal Revenue Code does exempt some property from seizure. Clothing and school books; fuel, provisions, furniture and personal effects not exceeding $6250; books and tools of a trade not exceeding $3125; unemployment benefits; undelivered mail; certain pension payments; workers compensation; child support; certain disability payments; minimum exemptions for wages and certain public assistance payments are exempt from levy and seizure under Internal Revenue Code 6334.
In addition to the property exempt from seizure under Internal Revenue Code 6334, the code also requires the written approval of a United States District Court judge in order to seize the principle residence of a taxpayer.
While the IRS does have the statutory authority for the seizure of assets, it is an arduous and lengthy process for Revenue Officers to undertake. On top of a number of required investigative steps that must be completed to determine the appropriateness of the seizure, there is a litany of forms that must be completed prior to a managerial review of the sufficiency of the proposed action. Additionally, there are layers of IRS review to determine the appropriateness of the levy action, including managerial review, in some cases multiple levels of review, IRS legal advisory and in some cases judicial approval.
The bureaucracy involved in effectuating a proposed asset seizure gives taxpayers the opportunity to establish their case to either demonstrate that the proposed seizure would cause a financial hardship, propose an alternative resolution of the debt or access the equity in the asset to pay over to the IRS, such as through an equity loan.
The ramifications of the IRS seizure process can have dramatic effects on taxpayers. The threat of having assets seized takes an incredible toll on taxpayers both financially and emotionally. Most assets have a greater value to their owners than just the market value. A personal residence may have been in the family for generations and jewelry and artwork may be family heirlooms. The specter of having these items seized can cause as much emotional anxiety over the sentimental value of the assets as it can anxiety over losing the financial benefits of the assets.
If the IRS has requested the voluntary sale of an asset to avoid its seizure please do not delay in reaching out to a tax practitioner who can work directly with the IRS to propose viable alternative resolution options or make a legal case for a statutory exemption for the property being proposed to be seized.
The tax attorneys at J David Tax Law are here to help.