The Internal Revenue Service will institute collection proceedings when a tax debtor fails to meet his or her federal tax obligations. One of the ways in which these collection proceedings can arise is in the form of the seizure of the tax debtor’s assets. A tax debtor facing this set of circumstances may find him or herself dealing with terms and concepts including levies, seizures, liens, garnishment, and other legal terms of art. It is important to understand the important and relevant distinctions between these terms when navigating the IRS collection process, if only to better protect yourself and your assets throughout the process.
The first major thing to bear in mind is that a seizure of a tax debtor’s assets is not legally distinct from a levy for purposes of the IRS’ notification procedure. Internal Revenue Service, Internal Revenue Manual 18.104.22.168.2 (1-19-1999) Notice of Levy vs. Seizure, available at https://www.irs.gov/irm/part5/irm_05-011-001.html. Thus, the IRS’ use of a notice of levy (Form 668-A/668-W) pursuant to taking a tax debtor’s property held by someone else is permissible if it can be turned over by writing a check. Where the property is physically retained, alternative procedures must be used, but when it comes to fungible assets such as assets found in a taxpayer’s bank account, wages, other income, or accounts receivables, the notice of levy can function as a notice of asset seizure.
There are a number of seizures that the IRS cannot perform. These include seizures where a tax debtor does not retain sufficient equity in the property being seized, seizures where there is an installment agreement with the IRS pending, seizures where an installment agreement with the IRS is already in effect, or seizures where there is an offer in compromise pending. Other seizure situations are also prohibited, including seizures conducted on the same day that a tax debtor must appear in response to a summons, seizures where communications with a tax debtor are initiated outside of the hours of 8 a.m. to 9 p.m., and seizures in violation of an automatic bankruptcy stay. Other situations are prohibited as well, and the IRS is obliged to review the prohibited seizure list prior to seizing assets in order to avoid taking actions that are otherwise prohibited under the applicable federal law or IRS regulations.
For more information relating to the seizure of assets, consult an experienced federal tax professional to learn more.
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.