The enforcement division of the Internal Revenue Service (IRS) has extremely broad powers in the enforcement and collection of taxes. These powers include the garnishment of income and the seizure and sale of taxpayer assets to satisfy tax debt that is not being paid by other means.
– Can the IRS Really Take Away a Portion of My Wages?
Unfortunately, the answer is a resounding “yes”. However, this is usually the choice of last resort and is not usually done unless there is a fairly serious problem that has generally gone unresolved for quite some time.
An IRS wage garnishment or wage levy is a written notice sent by the IRS to the taxpayer’s employer requiring the taxpayer’s employer to withhold a significant portion of your pay and send it directly to the IRS. Your employer is obligated by law to follow the instructions of the IRS or face serious penalties. If you’re self-employed, the IRS can send a IRS wage levy to the your accounts receivable. Think of the repercussions you’ll have from your employer! Think of what your customers will say when the IRS wants your receivables to be paid directly to them!
IRS wage garnishments can also have a devastating impact on your financial situation. Furthermore, an IRS wage levy will generally remain in place until the tax liability is paid or until it is resolved through some other means.
You can usually stop wage garnishments from the IRS by not waiting for the IRS to start collection efforts and be proactive. Hire a licensed professional and protect your rights!
– Can the IRS Really Take Away My Home, My Car or Business?
Unfortunately, the answer is a resounding “yes”. However, this is usually the choice of last resort and is not usually one unless there is a fairly serious problem that has gone unresolved for quite some time. For the most part, the IRS can take any asset in which the taxpayer has sufficient equity.
IRS enforcement actions have increased markedly in the last several years. In 2000, the IRS conducted only 74 seizures. In 2008, seizures increased to 610. In 2009, seizures totaled 581.
Before the IRS conducts a seizure, they will normally perform an investigation to determine the equity in the item to be seized. In almost all cases, the IRS will not seize the asset unless there is at least 20% equity.
For example, if you own a home worth $300,000 and the mortgage against it is for $250,000, the IRS will not seize your home because the mortgage will have priority over the Federal tax lien.
The IRS normally reduces all seized property by at least 20% from fair market value. Therefore, your $300,000 home is reduced by $60,000 to a value of $240,000. Since the existing mortgage of $250,000 is greater than the reduced value of $240,000, there is no equity and the IRS is precuded from seizing the property.
However, if your house is worth $500,000 and the mortgage is $250,000, the IRS may very well seize your home. Fortunately, Congress has made it much more difficult for the IRS to seize personal residences. Except in very flagrant cases, it is unlikely that the IRS will consider seizing your home. Rental properties or vacation homes are a different story and if there is sufficient equity can be seized without great difficulty.
Businesses may be seized as well, but again, it is the exception, not the rule. First, the IRS must get a writ from a Federal judge. Second, once the business is seized, every single item must be inventoried. Can you imagine the amount of work that has to be done to seize something like an auto parts store or a hardware store? The IRS also must investigate to determine if there are any lien holders against property in the business. Then, if the IRS has to go to sale, it must conduct an auction of every item in the business. It is a very, very time consuming task and not one the IRS usually enjoys. In today’s climate, it is very rare to see a business seized. The IRS may try to force the business owner to shut down by continually levying receivables or seizing bank accounts, but a seizure today is pretty unlikely.
As unlikely as these scenarios sound, do nothing and you’ll leave the IRS no other opportunity but to seize your property or garnish your income.
Bottom Line — What Do I Do?
The bottom line is that when you receive certified mail of a Notice of Intent to Levy, you had better react by paying your taxes in full or hiring a LICENSED tax professional to represent you. The biggest problem for most of our clients is procrastination. If you owe delinquent taxes, the IRS is going after your assets. They’re going after your bank account, your wages, your car, your business and in some cases even your home. The time to react is NOW! The longer you wait, the less we can do for you, or the more time and cost it will take to “undo” the actions that have already been done.