According to IRS attorneys and other tax lawyers if you owe back taxes to the federal government, dealing with the IRS is not like dealing with any other creditor. Unlike most creditors, the IRS doesn’t need to run to Court and obtain a judgment against you before it takes action to get the back taxes you owe. Under U.S. law the IRS has the power to seize your property:
1. If the agency believes it has a valid assessment against you;
2. It’s asked you to pay; and
3. It’s given you notice of its intent to seize your property.
In addition to seizing your property, the IRS can issue a wage garnishment, an IRS levy and/or an IRS lien. These collection tools enable the IRS to get the back taxes you owe directly from your employer and/or your bank.
The agency does have limitations, however, on what types of property it may seize. Tax lawyers point out that things like clothes and schoolbooks are exempt from seizure, but expensive clothing items like furs or jewelry are not. The IRS may not seize fuel, food, furniture and/or personal effects from the head of the household if those items have a value of less than $1,500. Similarly, books and tools you may need for your profession or trade are exempt if their value does not exceed $1,000.
The IRS also can’t garnish your unemployment or workers compensation benefits. Certain annuities and pension payments are also exempt from seizure. And, believe it or not, the IRS can’t take all of your money! The agency must leave you minimum income of $75 per week, plus an additional $25 per week for each dependent.
Although the IRS can put you in jail for fraudulently concealing assets or otherwise evading taxes (yours or helping others to evade theirs) debtors prisons don’t exist in the United States and the IRS cannot put you in jail for owing back taxes, even though you may have owed the taxes for several years.
If you are someone who owes back taxes, or if you have unfiled returns, the longer you wait to deal with your tax problems the more it is likely it will cost you. Interest and penalties can add up quickly, and suffering the anxiety and frustration associated with being hunted down by the IRS and subject to IRS wage garnishment, IRS levy and/or IRS lien to force you to pay the back taxes you owe is avoidable if you just act.
Contact a tax lawyer or other tax professional to learn about how to settle your back taxes. If you have unfiled returns, it is important you complete and file those returns before attempting to negotiate a settlement with the IRS. This way, the agency is likely to be more willing to work with you once the totality of your tax liability has been established through the filing of those unfiled returns.
Segal, Cohen & Landis 9100 Wilshire Blvd. Ste. 601E Beverly Hills, CA 90212 (310) 285-3999