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?
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.
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.
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:
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.
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.
The IRS must follow a distinct three-step process and obtain approval from a United States District Court judge prior to seizing taxpayer assets:
The IRS sends a formal notice demanding payment to the taxpayer.
The notice is ignored, neglected, or payment fails to be made by the taxpayer.
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.
The IRS exempts specific types of property from seizure to protect taxpayers' basic needs:
Three types of forfeiture can occur under federal law, each with distinct procedures and requirements:
In rem action allowing seizure without filing a federal lawsuit, for property valued at $500,000 or less with no claim filed.
In personam action requiring criminal conviction, restricted to defendant's property interests including gains from illegal activity.
Targets property rather than the person, no criminal conviction required, allows government to pursue claims against inaccessible assets.
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.
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.
Included procedural tools, time constraints, and broadened forfeiture definitions.
Made it illegal for federal agencies to "adopt" assets seized by state and local agencies.
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.
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.
Don't face IRS asset seizure alone. Our experienced legal team can help protect your assets and negotiate alternatives to seizure.
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