Seizure vs Forfeiture — What’s the Real Difference?
Although both allow the government to take property, IRS seizure and asset forfeiture operate under completely different laws. A seizure is a collection tool for unpaid taxes, while forfeiture is a law enforcement measure tied to criminal or civil violations. Understanding which applies to your situation determines your rights—and how quickly you need to act to protect your property.
Did you know that in 2022 alone, the IRS Criminal Investigation (CI) division seized over $7.9 billion in assets, including real estate, vehicles, and financial accounts? While many taxpayers associate IRS enforcement with tax liens and wage garnishments, asset seizures and forfeitures are among the agency’s most aggressive collection tools.
Key Takeaways
- Seizure is a tax collection action, while forfeiture is a criminal or civil enforcement measure.
- IRS Seizure happens when the IRS takes and sells property to collect unpaid tax debt.
- Asset Forfeiture occurs when the government confiscates assets tied to criminal acts.
- Taxpayers receive multiple notices and appeal rights before an IRS seizure.
- In forfeiture cases, the government can permanently keep property if not successfully challenged.
Understanding which law applies helps determine your rights and legal defense options.
What Is an IRS Asset Seizure?
When a taxpayer fails to pay their tax debt, the IRS can enforce collection through asset seizure. While many people are familiar with tax liens and IRS wage garnishments, seizure is one of the most severe enforcement actions the IRS can take. Unlike a lien, which secures the government’s interest in property, a legal seizure involves taking and selling a taxpayer’s property to satisfy outstanding tax liability.
Taxpayers who ignore repeated IRS notices or fail to negotiate a payment plan may risk losing bank accounts, vehicles, business equipment, or even real estate. IRS seizure is a tool for collecting unpaid taxes and is distinct from forfeiture, which the government uses to confiscate assets linked to illegal activity.
How Does the Asset Seizure Work?
The IRS does not immediately resort to seizure when a taxpayer has unpaid tax debt. The agency follows a structured process and gives multiple opportunities to resolve the issue before taking drastic action.
1. Tax Debt Accumulation
A taxpayer incurs a tax debt when they fail to pay the amount owed on time. This can happen due to unpaid income taxes, payroll tax liabilities for businesses, or penalties and interest accumulating on prior debts. Once the debt is recorded, the IRS begins the collection process.
2. IRS Notices and Demand for Payment
The IRS first sends a Notice and Demand for Payment. If ignored, the IRS escalates efforts. Typical notices include:
- CP14: First notice of unpaid taxes
- CP501 and CP503: Reminder notices of an outstanding balance
- CP504: Final warning before enforcement actions
3. Final Notice of Intent to Levy and Right to a Hearing
Before seizing property, the IRS must send a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days in advance. This gives one last chance to:
- Pay the balance in full
- Set up an IRS payment plan or installment agreement
- Submit an Offer in Compromise
- Request a Collection Due Process hearing
If no action is taken within 30 days, the IRS may proceed with asset seizure. Read more: what assets can the IRS seize?
4. Selling Seized Assets
After assets are seized, the IRS can sell them at public auction. Proceeds are applied to the tax debt. Any surplus is refunded; if the sale falls short, the taxpayer remains responsible for the balance.
If you have received an IRS Final Notice of Intent to Levy, time is limited. J. David Tax Law has helped taxpayers in all 50 states recover seized assets and negotiate relief. Call (888) 342-9436 for a free consultation.
What Is Asset Forfeiture?
Asset forfeiture and asset seizure are not interchangeable. Asset seizure is an IRS collection tool for unpaid taxes. By contrast, forfeiture refers to the government’s power to confiscate property suspected of involvement in criminal activity, sometimes even without a criminal conviction.
IRS Seizure vs. Asset Forfeiture — Comparison
- Legal purpose
- IRS Asset Seizure: Collect unpaid taxes
- Asset Forfeiture: Confiscate property linked to crime
- Trigger
- IRS Asset Seizure: Unpaid tax liability
- Asset Forfeiture: Criminal or civil investigation
- Legal authority
- IRS Asset Seizure: 26 U.S.C. §6331
- Asset Forfeiture: 18 U.S.C. §981, §982
- Requires conviction?
- IRS Asset Seizure: No
- Asset Forfeiture: Sometimes (criminal forfeiture only)
- How to stop it
- IRS Asset Seizure: CDP appeal, payment plan, Offer in Compromise
- Asset Forfeiture: File a claim, innocent-owner defenses
- Common assets
- IRS Asset Seizure: Bank accounts, vehicles, business equipment
- Asset Forfeiture: Cash, real estate, property tied to criminal acts
Types of Forfeiture
The government uses two primary types of forfeiture: civil and criminal. Both allow confiscation of property, but they differ in standards, requirements, and burdens of proof.
1. Civil Forfeiture
Civil forfeiture allows the government to seize property without charging the owner with a crime. Property itself is treated as “involved” in unlawful activity, even if the owner is never arrested or convicted.
- The government can confiscate cash, bank accounts, real estate, vehicles, and other assets believed to be linked to criminal activity.
- Common in matters involving money laundering, fraud, or structuring to evade reporting requirements.
- Authorized under 18 U.S.C. §981.
- The burden often shifts to the owner to show the assets were not involved in a crime; if the owner does not challenge in time, the government keeps the property.
Example: A small business owner regularly deposits cash just under $10,000 to avoid bank reports. The IRS suspects structuring and seizes the account under civil forfeiture. Even without criminal charges, the owner must go to court and prove the money was lawful to reclaim it.
2. Criminal Forfeiture
Criminal forfeiture follows a criminal conviction and is intended to punish by taking assets gained from or used in the crime.
- A conviction is required before property is permanently forfeited.
- Used in cases such as tax fraud, drug trafficking, racketeering, embezzlement, and organized crime.
- Typically targets money, vehicles, real estate, and business assets acquired with illicit proceeds.
- Pursued within the criminal case, so defendants face penalties plus loss of assets.
Example: A defendant is convicted for running a narcotics operation. The government forfeits his homes, vehicles, and accounts funded by drug proceeds.
Legal Protections Against Asset Forfeiture
Owners have rights to challenge both civil and criminal forfeiture. Understanding the law and available defenses can help protect seized money, real estate, bank accounts, and other assets from permanent loss.
Protections Against Civil Forfeiture
- Owners can contest the government’s evidence under 18 U.S.C. §981 and assert procedural due process rights.
- Innocent-owner defenses are available where the owner neither knew of nor participated in the alleged crime.
- Owners must receive notice and an opportunity to challenge the forfeiture in court.
Protections Against Criminal Forfeiture
- If the defendant is not convicted, property cannot be forfeited criminally.
- Defendants can present evidence that seized assets were legitimately acquired.
- Experienced counsel can help shield certain assets and build defenses.
Facing Asset Forfeiture? Work with an A+ BBB Accredited tax law firm with decades of collective experience. Contact J. David Tax Law today.
Final Thoughts
Both IRS seizure and forfeiture can result in the loss of bank accounts, real estate, business assets, and other property. IRS asset seizure collects unpaid taxes; forfeiture can permanently deprive owners of assets, sometimes without charges. Knowing the differences, your rights, and acting quickly are key to protecting your assets.
