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Being short on cash to the IRS can be stressful, particularly if you have valuable assets that are property like a home or car. A common concern of taxpayers is that the IRS will use those assets to satisfy the unpaid taxes.

The IRS can indeed take and sell a taxpayer’s home or vehicle, albeit it is a last-resort tactic that is carried out through certain methods and notices. A federal tax lien is also quite different than an IRS levy: IRS tax liens are not a lien on property, but a levy is a seizure of property or rights to property.

When the process unfolds, it’s beneficial for taxpayers to know how to react before the collection process reaches this stage.

A levy is a legal seizure of property to pay a federal tax debt. The IRS is able to seize financial assets, including bank accounts and wages, as well as physical assets like vehicles and real estate in suitable cases.

A levy does not constitute a lien for tax.

• Tax lien: Legal claim by the government to your property due to unpaid taxes.
• Tax collection: The actual action by the government in taking property or rights to property.

Having a lien does not necessarily mean that the IRS is seizing your home or car. But failing to address the underlying tax debt can ultimately result in more aggressive tax collection efforts.

Yes. An unpaid federal tax liability may be cause for real estate to be seized and sold. The IRS has a checklist of properties that it considers subject to its levy, which includes property such as a taxpayer’s home.

Seizing a primary home is, however, a huge collection action. Don’t assume that you will have a home seized when you receive a normal IRS balance-due notice.

In general, the IRS must do the following before it issues a levy: assess the tax, issue a notice and demand for payment, confirm that the taxpayer failed or refused to pay the tax, and in a minimum of 30 days before issuance of the levy, send a Final Notice of Intent to Levy and Notice of Your Right to a Hearing.

However, in certain situations, there are exceptions to some notice requirements, so it’s important that taxpayers pay attention to all IRS collection notices.

An IRS lien could be placed on a vehicle as well.

When the IRS has determined that a levy is an appropriate action and the IRS has met the collection requirements, the IRS can seize and sell a car.

The repercussions of the practical aspects can be particularly dangerous if the car is used for work or to get to the essentials of daily life. When asking for a collection solution, discuss with the creditor what your car does for you if it is necessary for you to work.

The determination of whether a specific car is being seized or not may be based on a range of factors including the taxpayer’s situation, the value of the car, applicable exemptions, and administrative factors.

The typical steps the IRS takes in collections consist of notices and collection opportunities.

The simplified sequence might look something like this:

1. Tax is assessed
2. IRS sends a bill
3. No payment or arrange for payment (taxpayer)
4. IRS mails notices for collection.
5. Final Notice of Intent to Levy may be issued.
6. Taxpayer is given a hearing to appeal the assessment.
7. IRS looks at collection alternatives
8. Levy/Seizure when requirements are met.

The IRS can also issue a Notice of Federal Tax Lien. However, keep in mind that a lien is not a seizure of property, but a claim to property.

Don’t put the notice to the side.

One of the worst warnings given by the IRS is a Final Notice of Intent to Levy. You may request a Collection Due Process (CDP) hearing under certain circumstances. IRS has a Form 12153 available to file for a CDP hearing.

In this stage, think about:

• Having a look at the relevant tax years
• Checking the accuracy of the balance
• Establishing if all necessary returns were filed. Deciding if all necessary returns were filed.
• Assessing an installment agreement
• If appropriate, using an Offer in Compromise (OIC) is one option.
• Determining eligibility for hardship collection relief
• Talk to a qualified tax professional
• Timing is crucial because collection deadlines could be critical.

There are a few situations where the IRS can implement a levy. As an example, an IRS levy can be issued if the individual pays the debt, enters into a suitable installment agreement, or if the levy provides an economic hardship.

A levy can be released if they believe that doing so will allow the taxpayer to pay the taxes, or if the homeowner’s taxable value is higher than the taxes owed and releasing the levy would not make it more difficult to collect.

But the release of a levy doesn’t cancel out the tax debt. Nevertheless, the underlying liability needs to be resolved.

There may be options to pay off the balance all at once.

• Installment Agreement

An installment agreement is a plan for paying taxes over a period of time for taxpayers who can afford to pay off the debt. These terms are based on a number of factors, including the amount of tax debt and financial status of the taxpayer.

The IRS might need to request detailed financial information for more complex or larger balances.

• Offer in Compromise

An eligible taxpayer may be able to settle tax liabilities for less than the amount owed by filing an Offer in Compromise.

The IRS takes into account the taxpayer’s financial status and paying capacity. It is not just a call for a reduction in price, and taxpayers need to be wary of companies that guarantee settlements.

• Currently Not Collectible Status

You may be eligible for the IRS’s amnesty program, called Currently Not Collectible (CNC), if paying the IRS would make it impossible to pay for basic, reasonable living expenses.

Usually, CNC status is not a way of getting rid of the debt, but rather a way to postpone the debt. The IRS will have an opportunity to do a financial check back later.

When the IRS seizes property, it typically sells the taxpayer’s interest in the property and uses the proceeds to pay for its seizure and sale and then the tax debt. The IRS sets a minimum bid price and offers the taxpayer an opportunity to challenge the fair market value determination.

The IRS normally waits at least 10 days after posting public notice before selling seized property, and will normally notify the public before the sale of a property. The IRS will normally notify the public before the sale of a seized property, and will generally give a minimum of 10 days’ notice of the sale after posting it publicly.

Excess amounts that are paid by sale of a property can be returned to the taxpayer if the property sells for more than the amounts that must be paid.

Sometimes.

A release may occur under the following (and other) conditions, according to the IRS:

• The taxpayer pays it.
• The collection period has closed.
• When the seizure is released, the taxpayer will pay the tax.
• An agreement to pay in installments will stop the seizure from proceeding.
• The seizure imposes an economic hardship.
• The property is worth more than the tax debt, and releasing it will not cause the tax debt to be lost.

In certain circumstances, you can ask the IRS to return the property or pay you damages if you believe that the IRS has taken it improperly. The deadlines may vary if the property is still under the custody of the IRS or if it has been sold by the IRS.

IRS collection may take into account a person’s home equity.

For instance, if a taxpayer has a home valued at $600,000 with a $500,000 mortgage, their net worth is considered to be $100,000. The taxpayer will probably own a very large portion of this home compared to an owner of a home with a similar price tag, no mortgage.

This is not to say that the IRS automatically assumes the home if there is equity in the home. The factors that would be considered in collection decisions are many, such as the taxpayer’s financial situation and alternatives. Real estate may have legal interests, such as mortgages, co-owners, exemptions, and more, and this is why professional advice can be especially important before acting.

It can create other legal and tax issues if the assets are attempted to be hidden or transferred incorrectly.

Avoid:

• Transferring a home to a family member merely to evade taxes on the property
• Avoiding collection by selling property for less than its worth.
• Hiding bank accounts
• Transferring money for no business or personal purpose
• Giving false financial data

Rather, provide a clear and honest picture of your finances and pursue a fair and legitimate collection solution.

If you’re behind on your tax payments and are afraid of losing your house or your car, here are some steps that you can take:

1. Follow up on IRS notices in a timely fashion.
2. Confirm the actual tax balance(s) and tax year(s).
3. Complete missing tax returns.
4. Keep up to date with any new tax liabilities.
5. Don’t file without a Final Notice of Intent to Levy.
6. Make sure to review an installment agreement before they start to be more aggressive about collecting.
7. If it is not practical to pay the full amount, consider an Offer in Compromise.
8. Document your necessary living expenses.
9. Describe why your car is an essential requirement or a job requirement.
10. If a levy or seizure seems likely, consult a professional to represent you.

Professional assistance may be particularly helpful when:

• You have a significant amount of debt.
• The IRS has assigned a Revenue Officer to this case.
• A final levy notice has been sent to you.
• You have important real estate or business assets.
• Several tax years are involved.
• You have outstanding returns.
• A bank or wage levy is being imposed on you.
• You’re not convinced that the IRS’s assessment is correct.
• You are thinking of filing an Offer in Compromise.

A seizure of the property has already taken place.

A knowledgeable tax law attorney can represent you in dealing with the IRS and assess your collection defenses and resolution options.

Yes, the IRS can seize property, be it a house or a car, for outstanding tax debts, but property seizure is not necessarily the initial method in the collection process. The IRS will usually give taxpayers a chance to pay the debt and will notify them before implementing a levy.

The worst thing you can do is delay until the IRS has taken your property. When you get a Final Notice of Intent to Levy, don’t take it lightly; it’s a deadline.

Know your liability, preferences, explore payment and/or settlement, and seek qualified help if needed. Taking action early can offer MUCH greater protection for your property and address the tax debt itself.

Yes. The IRS can take your home and sell it to recoup owed taxes. They have a variety of collection options at their disposal. Usually, these actions follow delinquency notices, so it is important to seek professional help when notices are received to recover assets before they are seized.

Yes, they can take your vehicle and sell it to get the money that you owe them. Before they do this, they have to make sure that it is necessary in terms of collection needs. If the car you have is your only means of transportation to get to work or if it is necessary for you to have it, tell the IRS that you will look for a method of payment that will work best for your situation.

You may be able to stop or release a levy by paying the taxes owed, setting up an acceptable payment plan, showing that you can’t pay your taxes due to financial difficulties, or other similar reasons. The taxpayer should take action as soon as possible after receiving any final notice of intent to levy and turn to a professional tax attorney for assistance.