Yes.
Asset seizure is one of the strongest tools for collection efforts available to the IRS. It can seize a home, bank accounts, retirement accounts or personal property, all with the singular focus of liquidating these assets and paying your federal tax debt.
Your best bet for avoiding an IRS seizure is to be prepared with the right information and to discuss your situation with a legal professional. Here is your guide to asset and property seizures and what you can do to protect yourself against them.
An Overview of Asset Seizures
An asset or property seizure occurs when the IRS must take your valuable property if you owe them money for unpaid taxes. This may include your vehicle, in some cases. Here’s what to keep in mind:
- Your assets usually won’t be seized if you owe the government under $5,000, but this can vary. The agency will generally only seize assets if you owe a large amount of money. You must own the asset for the IRS to be able to take it from you.
- The IRS will usually try other means to recoup what they’re owed before taking your assets or property, including garnishing wages or taking your tax refund. They can legally seize any asset that can be resold for money or has equity, which also might include an investment, a savings account, a boat, or a piece of jewelry.
- They cannot, however, seize anything that would be critical to you or your family’s survival.
- The IRS does seize real estate sometimes, including a house. They will sell the interest in the property, sell the home, and apply the profit to what you owe in tax debt. The IRS comes up with a minimum bid price in these cases.
The asset seizure process can be complex and emotional, so working with a tax professional is always a good idea if you are facing an asset seizure. You need someone on your side guiding you through it all.
How Do I Protect My Assets From the IRS?
While the IRS certainly has the authority to seize assets, the follow-up question isn’t as cut and dried. Can the IRS take my car? Yes. Does the IRS want to take my car? Not really.
The IRS, while essentially a collection agency, doesn’t receive any long-term benefit from impeding your ability to earn a living. In fact, it is vehemently opposed to taking any action that could directly lead to your furthered economic hardship. While their goal is to ultimately clear your tax debt – through an offer in compromise or liquidated assets – the IRS has rules in place that govern what assets can and should be seized.
For example, if you own your car outright, but it only carries a Blue Book value of $3,000, what is the net benefit to the IRS for seizing that property? They are not only paying for the services of the individuals involved in the seizure, but then have to make the effort to liquidate the asset to pay your federal tax debt. In all likelihood, the gain does not outweigh the effort.
7 Steps to Avoid an Asset Seizure
1. File and Pay Your Taxes
The best way to avoid having your car taken by the IRS is to file your taxes and pay everything on time.
2. Set Up an Agreement to Pay
The IRS will work with you if you cannot afford to pay the full amount of taxes you owe. You can set up a payment agreement with them, and this makes them aware of your situation and lets them know the money is coming.
3. Don’t Ignore Notices
The IRS will send you several notices if you owe them money. This would happen well before they seize any of your assets. Never ignore these notices, as they are very serious.
4. Be Honest
Never try to hide anything when you are communicating with the IRS. It is crucial for you to be honest about your situation, even if you’re worried you will get in trouble. It will be much worse if you don’t tell them the truth.
5. Learn About Offers in Compromise
An offer in compromise may also be an option if you can’t pay off your tax debt right away. This is an arrangement where you could end up paying less than you owe under a special payment plan. Offers in compromise only apply to certain situations, however, when the IRS may have no other way to get the debt repaid.
6. Look Into Forgiveness Options
The government may decide to forgive your tax debt in some rare cases. This could occur if you’re unable to afford payment because of lots of medical expenses, a terminal illness, you lost your job, an immediate family member passed away, or you got divorced. Forgiveness may be an option if you have experienced a severe life event and are worried the IRS will take your car.
7. Ask About the ‘Currently Not Collectible’ Status
Another way the IRS tries to help those in need is with the “currently not collectible” status, which may apply when you’re facing hardship and can’t pay your taxes. This is a temporary status, and the IRS will continue to review your situation and your ability to pay. You have to meet specific requirements for this option, including that you only have income from Social Security, you are unemployed, your income is low, or other considerations.
The simplest way to avoid asset seizure is to pay your taxes on time each year and pay your tax debt as soon as possible. Always be upfront with the IRS if an issue does arise. A tax attorney can help you understand your options and rights if you get into a tough situation regarding your taxes.
Can the IRS Take Your Only Car? What Should I Do?
In your situation, the best course of action is to work with a skilled tax lawyer who can negotiate with the IRS. While the IRS will not likely aggressively pursue an asset seizure, they can seize any assets they are owed. Their actions can increase in severity based on your willingness to work with them to resolve your tax matter.
It is important to speak to a professional to avoid any hassle with a potential IRS levy or lien on your property and assets. Anecdotally, good communication with an IRS Revenue Officer can work in your favor.
Contact a Tax Attorney to Deal With Asset Seizures
Having the IRS take your car to pay off tax debt can be a frustrating and scary experience. Silver Tax Group has won many successful outcomes for our clients against IRS asset seizures and other actions. We know how to get you a favorable ruling in tax cases.
Reach out to our offices to speak to a tax expert about car and asset seizures. These are no small matters, so it is important to get expert advice as soon as possible.
