If you fail, neglect, or refuse to pay your federal taxes, the IRS may seize and sell your property to satisfy your federal tax debts—especially if you fail to use Form 9465 to make payment arrangements. To seize your property legally, the IRS can use one of several tools.
The IRS Property Seizure Process
With some exceptions, the IRS will first send you a “Notice of Demand for Payment,” which is essentially your tax bill. If you respond to this notice, the IRS will typically allow you to set up a repayment plan using Form 9465.
Fortunately, a tax lawyer can help you create a good repayment plan. However, if you fail to respond to the notice, the IRS will issue a second and final notice called the “Final Notice of Intent to Levy and Notice” of Your Right to a Hearing.”
To ensure you receive the final notice, the IRS will typically deliver the final notice to you personally, leave the notice at your last known address, or send it by certified or registered mail. Once the IRS issues the final notice, you have thirty days from the date of the notice to make payment arrangements or appeal the action.
If you fail to take any action within the thirty-day window, the IRS will place a lien or levy on your property, allowing the IRS to seize and sell your property to satisfy your tax debt.
An Overview of Federal Tax Liens
A federal tax lien is basically a public notice that allows the IRS to seize and sell your property in order to settle your tax debt. Outlined in Section 6321 of the Internal Revenue Code, a federal tax lien essentially prevents you from selling your property until you settle your federal tax debt.
However, in the event you can sell your properly despite the lien, the buyer will essentially inherit the lien, meaning the IRS may recover the taxes owed from the buyer as well. With that in mind, there are essentially two types of liens.
With the first type of lien, the IRS will send a notice to the recorder’s office of your county of residence, which means the credit reporting agencies will list the lien. In turn, this will have a negative impact on your credit score. With the second type of lien, the IRS will not send a notice to the recorder’s office of your county of residence, which means it will have no impact on your credit rating, which means it is a silent automatic lien.
Of course, to get the IRS to remove a lien on your property, you must pay off your tax debt—in full—including any applicable penalties and interest. Alternatively, you can declare bankruptcy, make the IRS an offer in compromise, or wait for the time statue for tax collection to expire.
Non-Notice Property Seizure Tools
At this point, it is important to note that the IRS can also use certain types of legal tools to seize your property without your knowledge. These non-notice tools include a jeopardy levy, IRS Notice CP504, and Disqualified Employment Tax Levy. Additionally, if you are a federal contractor, the IRS can issue a levy to collect your tax debt.
If the IRS intends to take your property with your knowledge, it will place a federal tax lien or levy on your property. On the other hand, if the IRS wants to take your property without your knowledge, it will issue a jeopardy notice, IRS Notice CP504, or Disqualified Employment Tax Levy. To prevent the IRS from seizing your assets, engage a good tax lawyer.