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Can the IRS seize my property or business? Yes, they can, but it is not usually done unless there has been a
pretty serious problem that has gone a long time without resolution. What can the IRS take? For the most part, anything as long as it
has sufficient equity. The IRS can only seize your "right, title and
interest". In other words, they can only take what you own. If you own
a car and it's worth $20,000, but the loan on the car is $18,000, they can
only seize and sell your $2,000 equity. And with so little equity, the IRS
generally will NOT seize a car or anything else. However, suppose you own a
$30,000 Mercedes free and clear. The IRS seizure attaches the entire $30,000
because there is no lien holder against the vehicle.
You can bet that the IRS would seize this asset. Before the IRS conducts a seizure, they normally do an
investigation to determine the equity in the item to be seized. If you own a
home worth $300,000 and the mortgage against it is for $250,000, the IRS
would be foolish to seize your home. Why? Because a purchaser buys it
subject to any "senior encumbrance". A "senior
encumbrance" is a mortgage, deed of trust, lien or judgment that has
priority over the Federal tax lien. Contrary to popular belief, many items
do have priority over the tax lien. The general rule is "first in time,
first in right" which simply means if the lien, judgment, deed or
mortgage was properly filed prior to the IRS lien, it has a priority over
the IRS lien. The IRS normally reduces all seized property by at least 20% from
fair market value. That $300,000 home is reduced by at least $60,000 to a
reduced sale value of $240,000. Since there is a mortgage of $250,000, there
is no equity and the IRS will not seize the property. In fact, under the
law, the IRS is precluded from seizing any item in which there is no equity. If that house is worth $500,000 and the mortgage is $250,000, the
IRS may very well seize that property. 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. To protest a seizure or the mere threat of a seizure you may file
Form 911, Application for Taxpayer Assistance Order; Form 9423, Collection
Appeal or Form 12153, Application for Collection Due Process Hearing.
However, if your case has gone that far, you need professional assistance.
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