What Happens When The IRS Moves To Seize My Property?
If you have defaulted on your taxes, IRS will take all the necessary steps to ensure you clear your debt. After a tax lien fails to compel you to pay your overdue taxes, IRS will use a tax levy. A levy is simply the legal seizure of your assets to compensate for taxes owed.
While a tax lien is just a claim to a tax defaulter's assets, a levy gives IRS the right to seize your assets. IRS may levy your investment accounts, bank accounts, accounts receivable, social security, wages, insurance policies, pensions, and physical assets. Read on to learn about IRS property seizures.
The IRS Seizure Process
There are three steps that IRS uses when seizing taxpayer's property. The whole procedure ensures that a taxpayer has sufficient notice about IRS's intention to seize their property and has enough time to contest or appeal the tax levy. The IRS is legally required to follow these steps before seizing your property.
The first step that IRS takes when seizing property is sending a "Notice of Demand for Payment". This notice informs you about the tax assessment issues in question and demands that you make payment. The next phase is where you decline to make the payment to IRS. Finally, IRS will give you a "Final Notice of Intent to Levy" and a "Notice of Your Right to a Hearing". This final notice should be delivered to you personally, or at your home address, or sent to you through certified or registered mail.
Requesting for a Collection Due Process Hearing
After you receive the final notice of intent to levy, you will have 30 days to ask for a review of your case or to request for a "Collection Due Process" hearing with IRS's Office of Appeals. At this point, it is advisable to hire a tax attorney for a stronger defense. At the "Collection Due Process" hearing, you can provide reasons why the seizure should be withdrawn. Common defenses include ongoing bankruptcy proceedings, wrongfully assessed records, expiration of the time within which IRS is supposed to collect taxes, or that your spouse is liable for the debt. After you are through with a Collection Due Process hearing, IRS will decide on what to do with your case. After the decision of the hearing is delivered, you will have 30 days to appeal to the IRS Office of Appeals
Other Strategies for Stopping an IRS Levy
Agree to a Payment Plan
The IRS and the federal taxing authorities will offer you various payment plans based on your financial situation. When you settle at a specific payment plan, the levy will be stopped.
Offer in Compromise
An offer in compromise is a pact to pay less than the amount you owe. This option is restricted to those who meet certain criteria. To know whether you qualify for this alternative, you ought to consult a tax resolution expert.
Prove Financial Hardship
If you can prove that the IRS levy has put you in financial hardship, the levy will be stopped. Though an IRS seizure will be stopped, it does not mean your debt is nullified. This is only a temporary measure to allow you time to get your finances in order.
How an IRS Levy on Your Bank Account, Tax Refund, and Wages Is Executed
If IRS attaches a levy to your tax refund or wages, the levy is in effect until you clear your debt. The other ways your tax refund or wages can be released from a levy is if the statutory limitation of the levy expires.
When IRS attaches a levy to your bank account, the bank will freeze the amount in your account that is equivalent to your tax debt. The bank is supposed to freeze this amount for 21 days after which it should send the cash and any accruing interest to IRS to clear your debt.
How IRS Seizes Your Property
When seizing your business or home, there are specific steps that IRS must follow. First, IRS must enter your premises with your permission. If you grant IRS's request of entry, you will be required to sign a form and leave them to seize your property. If you decline their request, the IRS will file an application for a seizure order with the U.S. Magistrate or District Court Judge. After the judge issues a seizure order, IRS will move into your property and seize it. IRS will afterwards sell your house or business assets to recover their dues.
If IRS issues you a notice of seizure of property, your first response should be to reach the IRS Appeals Office and request for a "Collections Due Process" hearing. Your other options are to agree to a payment plan, or an offer in compromise. Any hesitation on your part could result in the seizure of your property; therefore, ensure you take immediate action, or contact a tax attorney for advice on what to do.