The United States Internal Revenue Service (IRS) is a powerful agency able to exercise many options in the pursuit of a tax debt. This article explains the situations in which the IRS is able to seize your home or business in the pursuit of a collection of a debt.
The Collection Process
If you owe outstanding taxes, the IRS will first contact you via mail with a bill detailing the debt. Overdue tax debts are subject to penalties and interest, so the longer the balance remains unpaid, the larger the outstanding debt will become. If you are unable to pay the debt in full, you should make an attempt to pay as much as you can, to avoid further penalties and accrued interest.
If you cannot pay the tax debt by the date indicated in the initial bill, you should contact the IRS to negotiate a compromise to resolve your tax liability or arrange a monthly installment plan. It is important to contact the IRS and make arrangements to pay the overdue tax voluntarily, or they will begin the collection process, which can lead to liens, levies, and future IRS retention of tax refunds.
Can the IRS Seize Your Home or Your Business?
Yes. The seizure of a taxpayer's home or business is authorized by the Internal Revenue Code. The IRS District Director is empowered to take a taxpayer's home or business with a stroke of his pen. The Internal Revenue Service Restructuring and Reform Act of 1998 (1998 Tax Act) extended the District Director's privilege to seize homes and businesses to U.S. District Court Judges and Magistrates. The Act provides a safety net for a taxpayer owing $5,000 or less.
If you owe the IRS taxes and do not pay in a timely manner, the IRS can undertake enforced collection in the form of levies, seizures and public sale. There is very little that the IRS is prohibited from seizing. Exempt assets are usually confined to small items of minimal value.
The Seizure Process
The IRS must follow specific procedures for seizing a taxpayer's home or business. First, they must ask your permission to enter your premises. If you wish to allow the IRS to enter and seize your home or business, you simply sign your name to a short form and walk away. If you refuse to give permission, the IRS will apply for a seizure order with a U.S. District Court Judge or Magistrate. Once the judge has read and approved the IRS' request for a seizure order, IRS agents prepare to descend upon your property, and may carry weapons. You will be allowed to collect your personal effects. The IRS will then padlock the premises, post notices to the public, and arrange to sell the business assets to the highest bidder.
Why Do People Lose Their Homes and Their Businesses to the IRS?
IRS seizures of homes and businesses are often unnecessary, and sometimes illegal. Seizures can be caused by ill feelings and poor communication between the taxpayer and the IRS collector. Most people who owe taxes are able to negotiate a satisfactory solution with IRS collectors. The 1998 Tax Act brought new avenues of relief for taxpayers, allowing them to petition for administrative resolutions if they feel that the IRS has been overzealous in its collection efforts, or if there is a dispute regarding the amount that the IRS claims is outstanding.
Questions? Get a Free Review of Your Tax Situation
The IRS does have broad power to enforce federal tax laws and collect on back taxes. However, there are limits and there may be ways to settle your dispute without the IRS resorting to drastic measures. The key is to have a qualified tax attorney advocating on your behalf. You can meet with an attorney in your area today for an initial and confidential evaluation of your situation at absolutely no charge to you.