Anaheim IRS Seizures of Assets

Anaheim IRS Seizures of Assets

IRS asset seizure is a legal process where the Internal Revenue Service takes possession of a taxpayer's property to satisfy unpaid tax debts. This action is typically a last resort after other collection attempts, such as sending notices and levying bank accounts, have failed. The IRS can seize various types of assets, including personal property, real estate, financial accounts, and business assets.

Why the IRS Seizes Assets

The IRS has the authority to seize assets when taxpayers fail to pay their outstanding tax liabilities. Asset seizure is used to enforce compliance with tax laws and ensure the collection of taxes owed. The process usually follows a series of steps:

• Assessment of Tax Liability: The IRS determines the amount of tax owed.
• Demand for Payment: The IRS sends a bill demanding payment.
• Final Notice: If the taxpayer does not respond, the IRS issues a final notice of intent to levy and the right to a hearing.
• Seizure: If the debt remains unpaid and the taxpayer does not arrange for payment, the IRS proceeds with asset seizure.

Legal Basis for IRS Seizures of Assets

Tax Code Provisions

The Internal Revenue Code (IRC) provides the legal framework for the IRS to enforce tax laws, including the authority to seize assets. Key sections of the IRC relevant to asset seizure include:

• IRC Section 6321: This section establishes that if any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.
• IRC Section 6331: This section grants the IRS the authority to levy upon all property and rights to property of a taxpayer who has failed to pay their taxes within ten days after a notice and demand for payment. The levy can be placed on property in possession of the taxpayer or third parties (such as banks or employers).

Authority of the IRS

The IRS’s authority to seize assets comes from federal law, specifically the Internal Revenue Code. This authority is broad, allowing the IRS to take a wide range of property, including personal belongings, real estate, and financial accounts. The IRS can:

• Issue a Tax Lien: A lien is a legal claim against property due to unpaid taxes. It encumbers the property, making it difficult for the taxpayer to sell or refinance until the debt is resolved.
• Execute a Levy: A levy is the actual seizure of property to satisfy a tax debt. This can include garnishing wages, seizing funds from bank accounts, or taking physical property.

Due Process Requirements

Before the IRS can seize assets, it must follow certain legal procedures designed to protect the taxpayer’s rights. These due process requirements include:

• Notice and Demand for Payment: The IRS must first send a notice and demand for payment to the taxpayer. This notice informs the taxpayer of the amount owed and requests payment.
• Final Notice of Intent to Levy and Right to a Hearing: If the taxpayer does not respond to the initial notice, the IRS must send a final notice at least 30 days before the levy. This notice informs the taxpayer of the intent to levy and their right to request a Collection Due Process (CDP) hearing.
• Collection Due Process (CDP) Hearing: The taxpayer has the right to request a CDP hearing within 30 days of receiving the final notice. During this hearing, the taxpayer can contest the levy, propose alternative payment arrangements, and present their case to an independent officer. The hearing ensures that the IRS’s actions are appropriate and that the taxpayer’s rights are protected.

Types of Assets the IRS Can Seize

Personal Property

The IRS has the authority to seize various types of personal property to satisfy unpaid tax debts. Examples of personal property that can be seized include:

• Cars and Other Vehicles: Automobiles, motorcycles, boats, and recreational vehicles.
• Jewelry: Valuable items such as watches, rings, necklaces, and other jewelry.
• Electronics: High-value electronics like computers, televisions, and home entertainment systems.
• Collectibles: Items such as art, coins, antiques, and other valuable collections.
• Household Goods: Furniture, appliances, and other personal belongings of significant value.

Real Property

Real property, including land and buildings, can also be seized by the IRS. This includes:

• Primary Residences: While the IRS generally avoids seizing primary residences, it is not prohibited. Before seizing a primary residence, the IRS must obtain court approval and ensure all legal requirements are met, including providing adequate notice and opportunities for the taxpayer to address the debt.
• Secondary Properties: Vacation homes, rental properties, and undeveloped land are more commonly targeted for seizure as they are not considered essential living arrangements.
• Commercial Real Estate: Properties used for business purposes, such as office buildings, warehouses, and retail spaces.

Financial Assets

The IRS can seize a wide range of financial assets to satisfy tax liabilities. These include:

• Bank Accounts: The IRS can levy funds directly from checking, savings, and money market accounts.
• Retirement Accounts: Although more complex, the IRS can access retirement funds from accounts such as 401(k)s, IRAs, and other pension plans. However, they must follow specific procedures, and early withdrawal penalties and taxes may apply.
• Investment Accounts: Stocks, bonds, mutual funds, and other securities held in brokerage accounts can be seized and liquidated to pay off tax debts.
• Life Insurance Policies: Cash value from life insurance policies can be accessed by the IRS to settle outstanding tax liabilities.

Business Assets

The IRS also has the authority to seize assets used in business operations. This can significantly impact a business’s ability to function. Types of business assets that can be seized include:

• Equipment and Machinery: Industrial equipment, manufacturing machinery, and other tools essential for business operations.
• Inventory: Products, raw materials, and goods held for sale can be taken and sold.
• Accounts Receivable: The IRS can levy amounts owed to the business by its customers.
• Business Vehicles: Trucks, delivery vans, and other vehicles used for business purposes.
• Business Bank Accounts: Funds held in business checking, savings, and merchant accounts.

Legal Protections and Exemptions

Exempt Property

Federal law provides protections for certain types of property, which are exempt from IRS seizure. These exemptions ensure that taxpayers are not left destitute and can still maintain a basic standard of living. Key exempt properties include:

• Necessary Clothing: Essential clothing items for daily living.
• School Books: Books and materials required for the education of the taxpayer's dependents.
• Tools of Trade: Tools and equipment necessary for the taxpayer's trade or business, up to a specified value.
• Unemployment Benefits: Payments received as unemployment compensation.
• Undelivered Mail: Mail that has not yet been delivered to the taxpayer.
• Certain Pension and Retirement Accounts: Most pension plans and retirement accounts are protected, although some exceptions apply.
• Workers’ Compensation: Benefits received under workers' compensation laws.
• Minimum Living Allowance: A portion of wages, generally equivalent to a minimum living amount, is exempt to ensure the taxpayer can meet basic living expenses.
• Public Assistance Benefits: Payments received under public welfare programs.

Appeals and Relief Options

If the IRS issues a notice of intent to levy or seizes assets, taxpayers have the right to appeal the action and seek relief. Options include:

• Collection Due Process (CDP) Hearing: Taxpayers have the right to request a CDP hearing within 30 days of receiving a final notice of intent to levy. During this hearing, taxpayers can contest the levy, propose alternative payment arrangements, and present their case before an independent officer.
• Offer in Compromise (OIC): Taxpayers can negotiate a settlement with the IRS to pay less than the full amount owed. The IRS considers factors such as income, expenses, asset equity, and future earning potential.
• Installment Agreement: Taxpayers can set up a payment plan to pay off their tax debt over time. Once an installment agreement is in place, the IRS typically suspends levy actions.
• Currently Not Collectible (CNC) Status: If a taxpayer can demonstrate that paying the tax debt would cause significant financial hardship, the IRS may temporarily halt collection efforts by placing the account in CNC status.
• Appeal to the IRS Office of Appeals: If a taxpayer disagrees with the results of a CDP hearing or other IRS actions, they can appeal to the IRS Office of Appeals for further review.

Innocent Spouse Relief

Innocent Spouse Relief provides protection to individuals who filed joint tax returns but were unaware of errors or omissions made by their spouse. This relief can prevent the IRS from seizing assets to cover tax debts that are solely attributable to the other spouse. Key points include:

• Eligibility: To qualify, the taxpayer must demonstrate that the understatement of tax was due to erroneous items of the other spouse, and they were unaware of the errors when signing the return.
• Types of Relief: There are three types of innocent spouse relief:
  • Traditional Innocent Spouse Relief: Relieves the taxpayer from additional tax liability if they were unaware of the error.
  • Separation of Liability Relief: Allocates the additional tax liability between the spouses based on each individual's responsibility.
  • Equitable Relief: Provides relief when traditional innocent spouse relief and separation of liability relief do not apply, but it would be unfair to hold the taxpayer responsible for the additional tax.
• Application Process: Taxpayers must file IRS Form 8857 (Request for Innocent Spouse Relief) and provide detailed information about their situation.

How Tax Alliance Can Help

Facing the threat of IRS asset seizure can be incredibly stressful and overwhelming, but you don't have to go through it alone. Take the first step towards protecting your assets and securing your financial future by contacting Tax Alliance for expert guidance and support.

We encourage you to reach out to Tax Alliance today for a free, no-obligation consultation. Our team of experienced professionals will assess your unique situation, provide personalized advice, and develop a strategic plan to address and prevent IRS asset seizures. Taking action now can make a significant difference in resolving your tax issues and protecting your valuable assets.

• Address: 2002 E. McFadden Avenue, Suite 110, Santa Ana, CA 92705
• Phone: 1-800-987-3051
• Email: info@taxalliance.com
• Website: Tax Alliance

Don’t wait until it’s too late to address your tax issues. Contact Tax Alliance now to get the expert help you need to navigate the complexities of IRS asset seizures and safeguard your financial future.