What Assets Can the IRS Seize for Tax Debt?

What Assets Can the IRS Seize for Tax Debt?

• Jun 01, 2022

If you owe money to the IRS, and you’ve reached the point that they’ve begun to take collection actions against you, you’ll naturally have some questions and a lot of concerns. One of the main questions many people in this situation have is in regards to what assets they stand to lose if the IRS decides to more forcefully collect on that tax debt. Can they take money right out of your bank account? Can they foreclose on your home? Keep reading to learn more about what assets the IRS can legally seize to settle a tax debt. If you find yourself facing IRS collections, contact the IRS Advocates today to get the support you need to settle your tax debt on your own terms.

Property the IRS Cannot Seize

First, let’s talk about the assets that the IRS cannot legally seize to settle your tax debt; hopefully, this will put a few of your fears to rest. The good news is that, even though the IRS has fairly broad powers of seizure, it still cannot legally claim property and income that are deemed essential to your family’s survival. This includes:

• Schoolbooks
• Clothing
• Work tools valued $3,520 or less
• Personal effects valued at $6,250 or less
• Furniture valued at $7,720 or less
• Assets with no equitable value
• Your personal residence, if you owe less than $5,000

That last one is a key point, because if you’ve paid off (or mostly paid off) your primary residence, it’s typically protected from tax-related seizures. However, it’s still not immune from tax liens, so the property might not be entirely unaffected by your tax debt. Of course, this also leaves the concern of potentially losing your home if you owe more than $5,000 on it. We’ll address your home specifically in just a moment.

It’s important to note that many of the items listed above have a maximum value that protects them from seizure. This is because the IRS views items with higher value than this as excess. For example, your family does need furniture in your home, but do you really need that $10,000 powered sectional with all the bells and whistles, and crafted from the finest leather? The IRS will be of the opinion that you don’t need something so extravagant, and will consider it a viable option for settling your debt.

Can You Lose Your Home?

The short answer to this question is yes, the IRS can legally seize your home, even if it is your primary residence, for unpaid tax debts. However, the good news is that this is very unlikely to happen. The IRS only seizes a few hundred homes each year for tax debt, because it is often seen as a last resort. Typically, they will opt for wage garnishment, liens, and other property seizures to satisfy the debt long before they will foreclose on a property.

This situation is especially unlikely if your total tax debt is less than your home’s worth. The IRS will not seize property that is worth more than what they are owed, so your average taxpayer with $50,000 or less in tax debt typically does not have to worry about this situation.

What Type of Property Can They Seize?

Legally, the IRS can seize any property (with the exceptions listed above) that has value and can be liquidated into cash for tax debt settlement. Items are usually sold in a public auction without giving you an opportunity to reclaim them, and the proceeds are applied to what you owe. Here are common examples of assets that the IRS will seize:

• Cars, trucks, RVs, motorcycles, boats, and other motor vehicles
• Vacation homes and other properties owned in addition to your primary residence
• Expensive jewelry
• Life insurance policies
• Investments
• Savings and retirement accounts

In this last situation, the IRS will usually issue what’s known as a bank levy, giving you forewarning that they may take what they are owed directly out of your accounts. Failure to take action on a bank levy will often lead to seizure of the funds in the levied account.

How Can I Stop It?

The best way to stop the IRS from seizing your property is to settle your tax debt. Obviously, this is often much easier said than done. However, here at the IRS Advocates, we specialize in helping taxpayers navigate the settlement options available to them, so that you can settle your tax debt on your own terms, rather than allowing the IRS to decide which assets can be seized and sold. Contact us today or visit our home page and answer a few questions to see if you qualify for an IRS repayment plan.