This is the fifth post in a five part series on IRS levies. This post will cover business asset seizures; in the previous posts we discussed personal bank levies, wage levies, personal asset seizures, and business bank levies.
As a small business owner, you know that your business relies on certain pieces of property to generate income. This may be a building your business operates out of, a vehicle you use to get to a work site, or tools that help you complete projects. If this IRS is unable to collect delinquent taxes from your business through voluntary payments or bank levies, they will start searching for property that can be sold to pay all or a portion of your taxes. This process is called an asset seizure. As with bank levies there are ways to prevent and minimize the effects of an IRS asset seizure if prompt action is taken.
How does the IRS issue an asset seizure?
To initiate an asset seizure, the IRS will send you a Notice of Seizure. On this notice the IRS agent will list a description of the property that is the target of the seizure. For example: A year, make and model of a vehicle or the legal description of a piece of real estate. The Notice of Seizure will often be followed by a Notice of Public Auction Sale. If this is the case, the IRS is stating its intent to sell the seized property at auction and apply the proceeds from the auction to your business’s tax debt.
Preventing an IRS Asset Seizure
If your business has unpaid taxes, it is important to be aware of your options from the moment you incur tax debt and how to prevent your case from getting to the point of an asset seizure. By the time the IRS issues a Notice of Seizure, the IRS should have already sent at least three notices of intent to levy. Therefore, it is a huge advantage if you address the tax debt before the Notice of Seizure is issued. You can do this by contacting the IRS after any of the notices of intent to levy are received and setting up a payment agreement or getting approved for currently not collectible status. If you are in a payment agreement or currently not collectible status, you are not in danger of an IRS asset seizure.
Sometimes it is not possible to prevent an IRS asset seizure in this way. For example, your business may have a large amount of non-liquid assets and a very small amount of liquid assets. In this case, the IRS may see asset liquidation as a prerequisite of entering into a payment agreement. Often, the IRS will give you the opportunity to liquidate the assets and turn the proceeds over to the IRS voluntarily. If this is not done within a reasonable period of time the IRS will issue a Notice of Seizure to force the liquidation of select assets.
However, if you can make a case that the assets are necessary for the business to produce income, this liquidation will not be required. The IRS generally will not attempt to seize assets that would harm the business’s ability to generate income to pay taxes to the IRS. In other words, if the retention of the asset would facilitate the IRS’s collection of the business’s delinquent taxes, they will typically not require liquidation or attempt to seize the asset.
Disputing an IRS Asset Seizure
If the IRS has already issued a Notice of Seizure despite your best efforts to prevent one, there are three main options for minimizing the effects of the seizure:
- You can request a Collection Appeals Process hearing within ten business days of the date your business receives the Notice of Seizure. Typically, this hearing will be limited to whether the IRS followed all technical guidelines when issuing the Notice of Seizure.
- You can request the assistance of the Taxpayer Advocate Service if you claim that the seizure has or will create a hardship. Generally, you must argue that a hardship would be placed on the employees of your business if an asset used to generate income for the business was taken.
- In the case of real estate, your business may have a window of opportunity to sell the property voluntarily even after the Notice of Seizure is received. If you find a buyer (including yourself) who is able to pay more for the property than the winning bid at the auction, the IRS will allow the voluntary sale. This can be in your business’s favor because, though your business may still be losing the property, a larger amount of money will go to pay off your business’s tax debt.
Though it is best to prevent an IRS asset seizure, if your business has received a Notice of Seizure from the IRS, there are ways to minimize the impact of the seizure. Working with an experienced tax attorney can help you choose what method will be most beneficial to your business.