Taxpayer Rights Before IRS Seizure Of Assets
The IRS is the most powerful collection agency in the United States. It has the power to levy, or garnish, and seize assets without ever having sued you in a civil court of law and obtained a judgment.
The IRS’ ability to bypass the usual collection hurdles which anyone else attempting to collect a debt must jump over makes them very dangerous indeed. A taxpayer ignores threats from the IRS at their own peril.
Except for certain small limitations, the IRS has the ability to levy (garnish) or seize
- bank accounts
- accounts receivable,
- assets transferred for less than fair market value to friends or relatives
- your home and other real estate
- cash value of life insurance
- pensions (also including federal pensions)
- Social Security benefits
- furniture and household belongings
This list is not intended to be an exhaustive list of what the IRS can seize, but it certainly gives you the correct idea that there is not much that they cannot go after.
Even though the IRS right does indeed have a right to seize assets, that does not mean that taxpayers are totally without protection.
The first step in preventing a levy or seizure is to hire a tax professional to start handling the case so that it does not get to the point of seizure or levy. But even if the IRS has started levy action, a tax professional can still work to prevent real estate or personal property seizure and other more drastic action by the IRS.
One important weapon that tax professionals have at their disposal is the taxpayer’s right to a hearing before the IRS seizes assets.
In the bad old days, before the IRS Reform and Restructuring Act of 1998, the IRS could, and did, seize assets with little warning and the taxpayer had almost no recourse to stop it.
I was representing a client who had two homes, one was an unfinished vacation home, which his family planned to eventually move into full-time. He had fallen off of a scaffold and broken his neck and was unable to work. But that didn’t stop the IRS Revenue Officer, and her manager, from driving nearly two hours to my office to tell me that they were going to seize the second home within the next 30 days unless he sold it and turned over the equity to them.
They told me that they thought that such action was “reasonable”. I promptly told them that the word “reasonable” was not in any way associated with the words “Internal Revenue Service”, and basically told them that could leave if that was all they had to say to me.
Luckily my client was able to sell the house for close to Fair Market Value within the 30-day time period, but that is rare. Usually when faced with a forced sale scenario, the resulting sale price is less than fair market value, sometimes much less.
The IRS does give a hoot for how much hardship you must endure – as long as they get their money. But regardless of what the IRS may want, there is now a provision which allows a taxpayer to have a “due process hearing” before a seizure is made.
A due process hearing is a hearing before an IRS Appeals Officer who is a member of Appeals Division of the IRS. This hearing, while quite different from a legal hearing, is certainly a rubber-stamp of the Collection Officer’s actions. You have the right to raise issues such as whether the seizure is really fundamentally fair. What this means is you have a right to argue that it would be fairer to stop the proposed seizure and start an Installment Agreement or an Offer in Compromise instead.
You can also raise the issue of whether you are an Innocent Spouse, or, in limited cases, whether the amount of the tax is correct or not.
At the very least, the Appeals Hearing buys you some more time to raise money to pay the IRS, and if necessary you can appeal the decision of the Appeals Officer to the United States Tax Court.
For a FREE Consultation with Attorney Jeffrey I. Fouts