In a prior post, we highlighted a number of penalties that you want to avoid with regard to paying taxes; specifically fees on late payments and unpaid taxes. While many people are afraid of the extra costs that can accumulate from unfiled returns or unpaid taxes, the real fear comes from the IRS’ ability to seize property.
Federal law gives the IRS power to exercise levies on property such as homes, cars and even personal property. While this power is quite extensive, it has limits. This blog post will highlight what the IRS may, and may not be, interested in claiming.
Generally speaking, the IRS is interested in extending levies on property that has equity. This means that property that has a value over the cost of such property. For instance, if you have a car that is worth $20,000, but you have an outstanding bank loan of $19,000 on it, there is only $1000 of equity in the vehicle. Chances are that the IRS would not be interested in seizing the vehicle given the paltry amount of equity.
Conversely, if you have a home worth $520,000 and a loan worth $200,000 on it, the IRS would definitely be interested in claiming a home that has more than $300,000 in equity. But most of all, the IRS is particularly interested in extending levies to bank accounts and investment accounts. These accounts are rich in equity, and are often hidden from the government.
Nevertheless, the best way to avoid levies is to address a tax problem before it gets to a point where the IRS becomes interested in seizing property. If you have questions about how to avoid liens and levies, an experienced tax attorney can help.