Understanding Your IRS Levy – How to prevent and dispute an IRS asset seizure of personal property

This is the third post in a five part series on IRS levies. This post will cover personal asset seizures; in the previous posts we discussed personal bank levies and wage levies; in the following weeks we will discuss business bank levies and business asset seizures.

Many people who have tax debt with the IRS feel safer if they do not have a checking account and deal mainly in cash. However, the IRS can still bring certain collection actions against you outside of a bank levy. For example, the IRS may attempt to levy your personal property such as vehicles, boats, and ATVs or your real estate. This process is called an asset seizure. As with bank and wage 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 tax debt.

Preventing an IRS Asset Seizure

It is common to wish for a time machine when you receive a Notice of Seizure. Since this is not a possibility, 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, you may have a large amount of non-liquid assets while you have a very small amount of liquid assets and disposable income. 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.

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:

  1. You can request a Collection Appeals Process hearing within ten business days of the date you receive the Notice of Seizure. Typically, this hearing will be limited to whether the IRS followed all technical guidelines when issuing the Notice of Seizure.
  2. You can request the assistance of the Taxpayer Advocate Service if you claim that the seizure has or will create a hardship.
  3. In the case of real estate, you may have a window of opportunity to sell your 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 favor because, though you may still be losing the property, a larger amount of money will go to pay off your tax debt.

Though it is best to prevent an IRS asset seizure, if you have 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 you.