Can the IRS make you homeless? Can the IRS take your 401(k)? How often does the IRS seize property? If I owe the IRS, can they take my inheritance?
If you’ve asked yourself any of these questions, you’re not alone. The IRS has the legal authority to seize assets when taxpayers fail to pay their debts, but not everything is fair game. Some assets are highly vulnerable to IRS collection, while exemptions and legal defenses may protect others.
In this guide, we’ll answer the most pressing questions about IRS asset seizures, including: What types of property the IRS can and cannot seize? (homes, cars, bank accounts, retirement funds, and more), How long does it take for the IRS to seize property? What happens to financed assets like cars and mortgages? How to stop an IRS asset seizure and protect your property. If you’re struggling with tax debt and worried about losing your assets, this guide will give you the answers needed to take action before it’s too late.
The IRS Seizure Process
The IRS does not immediately seize assets when a taxpayer owes a debt. The process follows a structured legal path that includes multiple notices and opportunities to resolve the issue before enforcement begins.
How the IRS Decides to Seize an Asset
The IRS does not seize property immediately when a taxpayer falls behind on their tax obligations. Instead, asset seizure is a last resort, used when other collection efforts, such as bank levies, wage garnishment, and installment agreements, have failed. Generally, the IRS seizes assets when:
The tax debt is significantly overdue – The IRS prioritizes taxpayers with large unpaid balances or those who have ignored multiple notices.
The taxpayer has failed to respond – If a taxpayer does not respond to IRS collection attempts, the agency escalates enforcement.
Other collection methods have not resolved the debt – The IRS typically uses bank levies and wage garnishment first, as these methods are more efficient than asset seizures.
The taxpayer has valuable assets that can be sold – The IRS assesses whether the sale of property, such as real estate, vehicles, or business assets, will generate enough revenue to cover the outstanding tax liability.
IRS Notice and Warning Process
Initial Notices: The IRS sends a Notice and Demand for Payment, followed by additional reminders if the debt remains unpaid.
Federal Tax Lien: If the taxpayer does not respond, the IRS files a federal tax lien, securing its interest in the taxpayer’s property.
Final Notice of Intent to Levy: Before a seizure, the IRS issues a final warning at least 30 days in advance, giving the taxpayer a chance to request a hearing or make arrangements to settle the debt.
Seizure Execution: If no action is taken, the IRS proceeds with asset seizure by issuing levies to banks, employers, and other financial institutions.
Types of Assets the IRS Seizes First
The IRS prioritizes liquid assets that are easiest to collect, starting with bank levies, wage garnishment, and investment funds. The IRS may move to physical assets like vehicles, real estate, and business property if these are insufficient. Homes are usually seized only in extreme cases, requiring court approval.
Taxpayer Rights and Options to Stop an IRS Seizure
Taxpayers can challenge an IRS levy through a Collection Due Process hearing or appeal under the Collection Appeals Program. Other options include negotiating an installment agreement, applying for an Offer in Compromise, or claiming financial hardship, which may temporarily halt enforcement.
Types of IRS Seized Assets
Under Internal Revenue Code (IRC) § 6331, the IRS has broad authority to seize a taxpayer’s property when they fail to pay their tax debt. This includes financial assets, real estate, business property, and certain types of income. However, the IRS must follow legal procedures, and some assets are protected under IRC § 6334, which outlines exempt property.
1. Financial Accounts and Investment Assets
The IRS prioritizes liquid assets that can be quickly accessed and used to pay off tax debt. These include:
Bank Accounts
Under IRC § 6332, banks must comply with an IRS bank levy, freezing the taxpayer’s account for 21 days before transferring the funds.
The IRS can seize checking, savings, and joint accounts if the taxpayer’s name is on them.
Investment Accounts
Stocks, bonds, mutual funds, and brokerage accounts can be levied if they are not in a protected retirement plan (per IRS Publication 1494).
Retirement Accounts (401(k), IRA, and Pensions)
Under IRC § 6334(a)(9), the IRS can levy retirement accounts only if the taxpayer can access the funds.
Employer-sponsored ERISA-protected 401(k) plans generally require additional legal steps before seizure.
If the IRS is targeting your bank accounts, investments, or retirement funds, you need to act fast. Our Tax attorneys can help you stop levies and protect your assets. Call us at (888) 342-9436 for a free consultation and take control of your tax situation.
2. Real Estate and Personal Property
While IRC § 6334(a)(13) requires IRS approval before seizing a primary residence, other types of real estate can be seized with fewer restrictions.
Primary Residences
The IRS must obtain court approval before seizing a taxpayer’s home.
The IRS may proceed with a forced sale under IRC § 7403 if there is sufficient equity.
Rental Properties and Vacation Homes
Since these are not primary residences, the IRS can seize and sell them without additional legal hurdles.
Land and Undeveloped Property
The IRS can place a lien on vacant land and auction it if other collection efforts fail.
The IRS may also seize non-exempt personal property under IRC § 6331, including:
Vehicles (Cars, Trucks, Boats, RVs, and Aircraft)
The IRS may cease and auction off owned vehicles but generally does not take those leased or used for work-related purposes.
Luxury Items and Valuables
Jewelry, collectibles, artwork, and other high-value personal property are subject to seizure if they can be sold to cover tax debt.
3. Business Assets and Income Sources
For self-employed individuals and business owners, the IRS can seize:
Business Bank Accounts
Under IRC § 6331, the IRS can issue a levy against business accounts, freezing available funds.
Equipment and Inventory
Business tools, machinery, and inventory may be seized under IRC § 6331(b) and sold at auction.
Accounts Receivable
The IRS can intercept customer payments owed to a business to satisfy tax debts.
The IRS also has the power to garnish income sources, including:
Wages and Salary
Through wage garnishment under IRC § 6334(d), the IRS can take a percentage of a taxpayer’s paycheck every pay period.
IRS Publication 1494 outlines the amount that must be exempt from garnishment.
Rental Income
If a taxpayer owns rental properties, the IRS can seize rental payments directly from tenants.
Social Security and Disability Payments
The IRS can garnish Social Security benefits under the Federal Payment Levy Program (FPLP) but cannot seize Supplemental Security Income (SSI).
How to Stop an IRS Asset Seizure
Receiving an IRS seizure notice can be overwhelming, but taxpayers have several options to prevent or stop an IRS property seizure. The IRS provides legal pathways for taxpayers to resolve their debts without losing their homes, vehicles, or bank accounts.
1. Responding to an IRS Seizure Notice
When the IRS plans to seize property, it must first issue a Notice of Intent to Seize assets. This notice gives the taxpayer a final opportunity to take action before the IRS seizure occurs. Ignoring this notice increases the risk of IRS asset seizure, including the loss of bank accounts, vehicles, and even real estate.
Taxpayers should immediately review the notice and consider the following options:
Request a Collection Due Process (CDP) Hearing – This hearing allows taxpayers to challenge the seizure and propose alternative solutions.
Verify the Debt Amount – In some cases, IRS errors can lead to wrongful enforcement actions. Taxpayers can request an account review to ensure the amount owed is accurate.
Check for Financial Hardship – If seizing property would cause undue hardship, taxpayers can apply for Currently Not Collectible (CNC) status, temporarily stopping enforcement actions.
2. Setting Up a Payment Plan or Offer in Compromise
To avoid IRS property seizure, taxpayers can negotiate alternative payment arrangements, such as:
Installment Agreement
Allows taxpayers to pay off their debt in manageable monthly payments, preventing further IRS enforcement.
Offer in Compromise (OIC)
Enables taxpayers to settle their tax debt for less than the full amount owed, if they can prove financial hardship or inability to pay.
Our tax lawyers at J. David Tax Law have successfully reduced tax debts through Offer in Compromise (OIC) for many clients, saving them thousands. If you’re struggling with IRS debt, we can help you explore your options.
Does the IRS Seize Property During a Payment Plan?
No. If a taxpayer is actively negotiating a payment plan or has an approved installment agreement, the IRS cannot seize property as long as the taxpayer is making timely payments. However, failure to comply with the payment plan may result in the IRS reinstating the seizure process.
3. Appealing an IRS Seizure
Taxpayers have the right to appeal an IRS levy or seizure under the Collection Appeals Program (CAP) or through a CDP hearing. Filing an appeal can delay enforcement and provide time to negotiate alternative solutions.
How Does an Appeal Affect IRS Seizure?
Once a taxpayer submits a timely appeal, the IRS cannot proceed with seizing assets until the appeal process is completed. If the appeal is successful, the taxpayer may be able to halt or modify the seizure. However, the IRS will resume enforcement actions if the appeal is denied.
Conclusion:
An IRS property seizure can be financially devastating, but taxpayers have legal options to prevent enforcement. J. David Tax Law specializes in stopping IRS seizures, bank levies, and wage garnishments through strategic appeals and negotiations. Our experienced tax attorneys fight to protect your bank accounts, investments, real estate, and business assets from IRS enforcement. If you’ve received an IRS seizure notice, immediate action is critical. We provide aggressive legal defense to help you settle tax debt and avoid asset loss. Contact J. David Tax Law today for expert representation and stop the IRS before it’s too late.
Your Tax Relief Questions, Answered
IRS property seizures are rare, with only 89 cases reported in FY 2022, a 79% decrease from previous years (TIGTA Report). Compared to millions of delinquent tax cases, this makes property seizure an uncommon enforcement action. However, the risk of IRS seizures remains accurate for taxpayers with significant unpaid tax debt, especially those who ignore IRS notices. The IRS primarily uses bank levies and wage garnishments before resorting to property seizures. If you’ve received an IRS seizure notice, call (888) 342-9436 today to protect your assets.
Yes, but it is rare. Under IRC § 6334(a)(13), the IRS must obtain court approval before seizing a primary residence. If a taxpayer has significant equity and no other assets available, the IRS may place a lien and force a sale. However, the IRS typically pursues other collection methods before seizing a home.
Yes, but the IRS can only take the equity in the vehicle. If the car loan balance is close to or greater than the car’s value, the IRS is unlikely to seize it, as there would be little to no proceeds from a sale. If the vehicle is fully paid off, the IRS can seize and sell it at auction to satisfy the tax debt.
Yes, the IRS can claim inherited assets if a taxpayer owes back taxes. The inheritance may be subject to a bank levy if it is deposited into a bank account. Additionally, if a taxpayer receives real estate or valuable assets, the IRS may place a lien on them. If you’re worried about protecting an inheritance from IRS seizure, call (888) 342-9436 for immediate assistance.
