How to Protect Your Assets from IRS

How to Protect Your Assets from IRS Seizure: Understanding the Process, Defenses, and Strategic Planning

Facing the possibility of an IRS asset seizure can be a stressful experience for any taxpayer. The Internal Revenue Service (IRS) has significant authority to seize assets to satisfy unpaid tax debts, but with proactive measures and strategic legal defenses, you can protect your property and financial stability. This tax lawyers guide outlines the IRS seizure process, common methods to protect your assets from IRS, and effective legal strategies to safeguard your assets.

The IRS Collection Process: Protecting Your Assets

The IRS does not immediately resort to asset seizure. It’s typically a last resort after multiple attempts to collect unpaid taxes have failed. Understanding the step-by-step process is critical to identifying opportunities for intervention. Here’s how it works:

1. Notice and Demand for Payment: The IRS sends a “Notice and Demand for Payment” (Form CP14 or similar) detailing the tax debt owed. This is the first formal step, giving you a chance to pay or negotiate. Ignoring this notice triggers further action.
2. Additional Collection Notices: If the initial notice is ignored, the IRS sends follow-up notices (e.g., CP501, CP503, CP504) over several weeks, escalating the urgency and warning of potential enforcement actions.
3. Final Notice of Intent to Levy: Before seizing assets, the IRS issues a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing” (CP90 or CP297). This notice grants you 30 days to request a Collection Due Process (CDP) hearing to challenge the levy or propose alternatives. This is a critical window to act.
4. Asset Seizure: If no resolution is reached, the IRS can seize assets such as bank accounts, wages, real estate, vehicles, or personal property. A revenue officer may visit your home or business to inventory and seize physical assets, often with a Writ of Entry if access is denied. Seized property is sold at a public auction, with proceeds applied to your tax debt.
5. Post-Seizure Actions: After seizure, you may still have options, such as redeeming property by paying the full debt before the sale or filing a wrongful levy lawsuit within two years if the seizure was improper.

IRS Seizure Process Timeline

• Day 0: Notice and Demand for Payment (CP14)
• Weeks 1–6: Follow-up Notices (CP501, CP503, CP504)
• Week 7–10: Final Notice of Intent to Levy (30-day window for CDP hearing request)
• Post-30 Days: Seizure and auction (if no resolution)

Note: This is a simplified timeline. Actual timing varies by case.

Assets Vulnerable to IRS Seizure

The IRS can seize nearly any property you own or have an interest in, including:

• Financial Assets: Bank accounts, wages, retirement accounts, Social Security benefits, and accounts receivable.
• Physical Assets: Real estate, vehicles, business equipment, and personal belongings.
• Other Property: Rental income, dividends, life insurance cash value, and inherited assets.

However, certain assets are exempt under Internal Revenue Code (IRC) § 6334, including:

• Personal items (e.g., clothing, furniture) up to $7,700.
• Tools of the trade up to $3,860.
• Unemployment benefits, workers’ compensation, and child support.
• A primary residence (unless approved by a federal judge).

Common Defenses Against IRS Seizure

Several legal and procedural defenses can protect your assets from IRS seizure. Working with an experienced tax attorney is crucial to leveraging these defenses effectively. Here are the most common:

1. Collection Due Process (CDP) Hearing:
   • What It Is: A CDP hearing allows you to challenge the proposed levy before an IRS Appeals Officer. You must request it within 30 days of the Final Notice.
   • Defenses Raised: You can dispute the tax debt’s validity, argue that the seizure is unfair, or propose alternatives like an Installment Agreement or Offer in Compromise (OIC).
   • Impact: A successful CDP hearing can halt the levy and preserve your assets.
2. Financial Hardship (IRC § 6343):
   • What It Is: You can request a levy release by proving the seizure would cause economic hardship, preventing you from meeting basic living expenses.
   • Example: If seizing your bank account leaves you unable to pay for necessities like food or rent, the IRS may release the levy.
   • Strategy: Provide detailed financial documentation to demonstrate hardship.
3. Innocent Spouse Relief:
   • What It Is: If the tax debt stems from a spouse’s actions, you may qualify for Innocent Spouse Relief, exempting your assets from seizure.
   • Application: This is particularly relevant in joint tax filings where one spouse is solely responsible for the debt.
4. Statute of Limitations:
   • What It Is: The IRS has 10 years from the assessment date to collect a tax debt (IRC § 6502). If the seizure occurs after this period, it may be invalid.
   • Strategy: Verify the assessment date with your tax attorney to ensure the IRS is within its legal timeframe.
5. Procedural Errors:
   • What It Is: The IRS must follow strict procedures (e.g., proper notice, Writ of Entry for private property). Errors can invalidate a seizure.
   • Example: If the IRS fails to issue a Final Notice or enters private property without consent or a writ, you can challenge the seizure’s legality.
6. Offer in Compromise (OIC):
   • What It Is: An OIC allows you to settle your tax debt for less than the full amount if you prove financial hardship or inability to pay.
   • Impact: An approved OIC can stop seizure and reduce your liability.

Strategic Planning to Protect Your Assets

Proactive planning is the best way to avoid IRS seizure. Here are strategic steps to safeguard your assets, ideally with the guidance of a tax law firm like [Your Tax Law Firm Name]:

1. Respond Promptly to IRS Notices:
   • Never ignore IRS notices. Contact the IRS or a tax attorney immediately to discuss payment options or disputes. Early action prevents escalation to seizure.
2. Negotiate Payment Plans:
   • Installment Agreements: Pay your debt in monthly installments. The IRS cannot seize assets if you’re compliant with an approved plan.
   • Example: A taxpayer owing $50,000 might secure a 72-month plan at $700/month, avoiding seizure.
   • Currently Not Collectible (CNC) Status: If you can’t afford payments, CNC status pauses collection actions without seizure.
3. Leverage Exemptions:
   • Maximize use of exempt assets (e.g., personal items, trade tools). For example, ensure your primary residence is protected unless the IRS secures judicial approval (rare).
4. Asset Protection Strategies:
   • Trusts: Certain irrevocable trusts can shield assets from IRS reach, but setup must predate tax issues to avoid fraud allegations.
   • Homestead Exemptions: In states like Texas, homestead laws protect up to $500,000 in home equity for couples, limiting IRS access.
   • Caution: Transferring assets to avoid seizure can trigger fraudulent conveyance claims. Consult a tax attorney to ensure compliance.
5. Hire a Tax Attorney:
   • A tax attorney can negotiate with the IRS, file appeals, and challenge improper seizures. We hand handled thousand of cases and have decades of experience stopping seizures through strategic defenses.

Contact Us

IRS asset seizure is a serious but avoidable threat with the right strategy. Don’t wait until IRS levies your assets. Plan ahead to protect your assets. Contact us (310) 788 9820 or visit to schedule a consultation.