Year: 2017

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Which Personal Assets Can the IRS Seize?

Posted by Kienitz Tax Law on with 0 Comment

The IRS’ official task is to collect taxes as required by the Internal Revenue Code. But because not every taxpayer pays taxes on time or in the correct amount, the IRS effectively becomes a debt collector — and what an effective and powerful debt collector it is.

The IRS has several tools to collect taxes owed. One of its most feared and powerful tools is the tax levy. Tax levies are particularly burdensome because they allow the IRS to take your personal property and assets. Luckily, the IRS can’t go about taking whatever personal assets it wants. It has particular rules about what it can levy and how much it can take.

Tax Levy Basics

A tax levy is the actual taking of property by the IRS in order to pay a tax debt. The two main types of tax levies include wage garnishments and the seizure of personal assets.

A tax levy usually won’t occur unless a tax lien has been placed on the taxpayer’s property first. A tax lien is a security interest taken by the IRS in all of a taxpayer’s property. The purpose of the tax lien is to protect the IRS’ ability to collect the tax debt from a particular taxpayer.

 

Personal Property Subject to IRS Seizure

The specific types of property the IRS may seize in order to satisfy a tax debt is vast. Examples include paychecks, personal residences (subject to exceptions), vehicles and financial accounts. Basically, almost anything a taxpayer owns can be levied, unless specifically excluded by law. So an easier way to identify which personal assets can be seized by the IRS is to find out what personal assets must be left alone.

 

Personal Property That Cannot Be Collected by the IRS

Section 6334 of the Internal Revenue Code lists types of property that the IRS may not seize when attempting to recover an unpaid tax debt. These include:

  • Essential clothing
  • Up to about $7,700 worth of personal effects and furniture
  • Up to about $3,800 worth of books or tools necessary for schooling or work
  • 85% of a taxpayer’s public assistance, worker’s compensation and unemployment benefits. The IRS may levy these income sources, but only up to 15% of the amount.
  • Undelivered mail
  • Certain pension and annuity payments
  • Wages necessary to pay child support and provide for basic living expenses

Personal vehicles and residences are subject to IRS seizure, but there are limitations and exceptions to this. Additionally, the IRS understands that there’s no point in taking something that might hinder a taxpayer’s ability to pay its tax debt.

For example, if a taxpayer needs his or her car to get to work, the IRS is probably not going to seize the car. Doing so might result in the taxpayer becoming unemployed and therefore the IRS will have a more difficult time collecting the tax debt.

An overarching theme of the IRS’s seizure powers is that it will take as much as it can to collect its tax debt, but it won’t take so much that the taxpayer is either unable to pay the rest of the tax debt or becomes destitute.

 

In Closing

The IRS’ public policy considerations and list of exempt property are hardly going to serve as a consolation to anyone facing a tax levy. A taxpayer facing a potential levy is understandably going to be scared and extremely concerned. In order to stop the IRS from taking your personal property, you’ll likely need help from a tax professional.
 

irs appeals

What You Can Expect from the IRS Appeals Process

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Not every decision the IRS makes is absolute. In fact, most of the IRS’ most significant conclusions and findings are subject to potential review by a neutral examiner at the taxpayer’s request. However, not every taxpayer who disagrees with the IRS should appeal the decision. But for those that do, the following is a general overview of the appeals process.

When and Why to File an Appeal

The following is a sample list of typical IRS decisions that can be appealed:

Any dispute that deals with a legitimate tax issue, such as a legal or factual disagreement, can be appealed. What can’t be appealed are religious, constitutional, political and moral disagreements with the IRS. Also, you can’t file an appeal for the sole reason that you can’t pay the tax debt the IRS believes you owe.

Submitting the Appeal

In order to handle the appeals process, the IRS has set up the Office of Appeals, which is a completely separate and independent office from the IRS. The goal of the Office of Appeals is to resolve tax disputes without resorting to the courts, which can be a costly and drawn out process for both sides.

The appeals process begins after an audit or some other tax decision. Following the decision, the IRS will ask the taxpayer to either accept or appeal its decision within a particular time period, which is usually 30 days. The taxpayer has two potential methods of proceeding with an appeal.

The first method is the Small Case Request appeal. This method is only available where the taxes, penalties and interest at issue for a particular tax year add up to $25,000 or less. When making this request, the taxpayer must explain what the taxpayer disagrees with and the basis for that disagreement.

The second method is the Formal Written Protest appeal, which is required for disputes amounting to more than $25,000. In a Formal Written Protest appeal, the taxpayer must provide the following information or take the following actions:

  • The taxpayer’s contact information, such as address and phone number.
  • A copy of the letter containing the IRS’ decision for which the taxpayer is appealing.
  • Identify the tax years at issue.
  • The specific IRS decisions or findings that the taxpayer disagrees with.
  • Facts and specific laws that support the taxpayer’s belief that the IRS made an incorrect determination.
  • Swear to the following statement: “Under the penalties of perjury, I declare that I examined the facts stated in this protest, including any accompanying documents, and, to the best of my knowledge and belief, they are true, correct, and complete.”

Once the appeal is submitted, the taxpayer should hear back from the Office of Appeals within 90 days, when a conference will be scheduled. These conferences are held before a Settlement or Appeals Officer and usually fairly informal. The taxpayer can have a CPA or attorney represent them if they choose. Occasionally, the appeal can be handled over the phone or by mail.

Following the conference, the Appeals Officer will make his or her decision and try to reach a settlement with the taxpayer. These settlements commonly side with the taxpayer at least to some extent, since the Appeals Officer wants to avoid the taxpayer being unhappy with the results of the appeal and taking the case to trial.

If a settlement can’t be reached and the Appeals Officer sides with the IRS, the taxpayer has the option to further challenge the IRS in a court of law.

In Closing

The appeals process is not something a taxpayer should decide to do as a knee-jerk reaction to an IRS decision the taxpayer disagrees with. There are many things to consider before initiating the appeals process. For instance, the Appeals Officer may bring up issues that the IRS auditor missed. Also, during appeals process, any interest will continue to accrue. The decision whether to appeal, as well as the appeals process, can be difficult for the typical taxpayer, so professional tax advice is highly recommended.