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Civil Asset Forfeiture Laws: A Comprehensive Guide to Asset Seizure and Asset Forfeiture

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Did you know that if you leave your tax debts unpaid without reaching an agreement with the IRS, law enforcement can legally seize your property to pay debts owed?

Key Takeaways

  • The IRS can seize property to pay tax debts with just 10 days notice after issuing a demand for payment
  • Asset seizure and asset forfeiture are different processes with distinct legal meanings
  • Certain types of property are exempt from IRS seizure, including basic necessities and tools of trade
  • Three types of forfeiture exist: administrative, criminal, and civil forfeiture

To seize your property, the IRS only needs to give taxpayers ten days after issuing a notice and demand for payment of taxes owed. After just ten days, the IRS can collect all taxes owed by seizing your property and auctioning it off.

When carrying out an asset seizure, the IRS will frequently seize real estate property, automobiles, private aircraft, and even business assets if they get judged as "ill-gotten gains," or assets obtained by engaging in unlawful activity.

Asset Seizure vs. Asset Forfeiture: What is the Difference?

Some people, even experts, use the terms asset seizure and asset forfeiture interchangeably even though they have separate meanings and refer to distinctive processes and concepts.

What is an Asset?

An asset can be a piece of property, an item, or any other object with value, whether that value comes from the thing itself or the value it brings to the owner. Examples include:

Tangible Assets:

  • • Cash and real estate
  • • Automobiles and motor homes
  • • Structures and acreage

Intangible Assets:

  • • Tax refunds
  • • Professional qualifications
  • • Income-generating artwork
  • • Liquor licenses

Asset Seizure

The act of physically seizing an item or transferring it from its owner into government control through law enforcement. This typically occurs during arrests, with search warrants, or in response to forfeiture warrants.

Asset Forfeiture

A legal procedure where ownership of an asset is taken away due to improper use, illegal acquisition, or use in committing crimes. The government receives title through civil, criminal, or administrative procedures.

IRS Asset Seizure Process

The IRS must follow a distinct three-step process and obtain approval from a United States District Court judge prior to seizing taxpayer assets:

1

Notice of Demand for Payment

The IRS sends a formal notice demanding payment to the taxpayer.

2

Payment Failure

The notice is ignored, neglected, or payment fails to be made by the taxpayer.

3

Final Notice

A Final Notice of Intent to Levy and Notice of Right to a Hearing is delivered, giving the taxpayer 30 days to arrange payment or appeal.

Property Exempt from IRS Seizure

The IRS exempts specific types of property from seizure to protect taxpayers' basic needs:

Clothing and personal items under $6,250
School books and furniture under $6,250
Trade books and tools under $3,125
Unemployment and disability benefits
Child support payments
Specific pension payments

Types of Asset Forfeiture

Three types of forfeiture can occur under federal law, each with distinct procedures and requirements:

Administrative Forfeiture

In rem action allowing seizure without filing a federal lawsuit, for property valued at $500,000 or less with no claim filed.

Criminal Forfeiture

In personam action requiring criminal conviction, restricted to defendant's property interests including gains from illegal activity.

Civil Forfeiture

Targets property rather than the person, no criminal conviction required, allows government to pursue claims against inaccessible assets.

IRS Asset Seizure Errors

Despite lengthy required processes, the IRS sometimes makes errors that can wrongfully impact taxpayers. The Treasury Inspector General for Tax Administration has found instances where the IRS did not comply with Internal Revenue Code sections, resulting in violations of taxpayers' rights.

To help combat these mistakes, the IRS uses pre-seizure planning techniques to avoid potentially expensive management or safekeeping concerns and ensure proper compliance with seizure procedures.

Civil Forfeiture: A Constantly Contested Method

At both federal and state levels, civil forfeiture faces significant scrutiny, resulting in constantly changing processes and laws. The modern practices began with the Comprehensive Crime Control Act of 1984, establishing the Equitable Sharing Program and Assets Forfeiture Fund.

Recent Federal Changes

2000: Civil Asset Forfeiture Reform Act

Included procedural tools, time constraints, and broadened forfeiture definitions.

2015: Federal Adoption Ban

Made it illegal for federal agencies to "adopt" assets seized by state and local agencies.

2017: Policy Reversal

Allowed federal government to take possession of assets associated with federal crimes and revived the Equitable Sharing Program.

Important: Forfeiture of assets to the IRS should only occur as a last resort to satisfy tax debt. The IRS aims to find alternative resolutions, including leveraging asset equity or agreed-upon repayment plans, and to avoid causing significant financial hardship.

Conclusion

The rules governing seizure and forfeiture give the IRS authority to seize property to satisfy tax debt. However, safeguards exist to protect taxpayers' rights. Changes to property forfeiture laws regularly occur to better address concerns about IRS asset seizure procedures.

Need Help with Asset Seizures?

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