What Assets Can the IRS Seize? Understanding Tax Levies

Written by Top Dog Tax Relief          
 read
Overview

When taxpayers fall behind on their federal taxes, the IRS has powerful tools at its disposal to collect unpaid debt. One of the most serious enforcement actions is an asset seizure, more commonly referred to as a tax levy. Unlike a lien, which is only a claim against your property, a levy allows the IRS to actually take and sell your assets to satisfy back taxes. If you have unpaid taxes, keep reading to learn more about when the IRS can move forward with a levy, which assets are at risk, and the steps you can take to protect yourself and your property.

Key Takeaways

  • A tax levy is the IRS’s strongest collection tool. Before they seize anything, the IRS must send proper notices and allow you to resolve your debt.

  • Not all assets carry equal risk. Bank accounts and wages are common targets, while primary residences are rarely touched.

  • You have options to avoid seizures. Payment plans, tax relief programs, and professional guidance can help safeguard your assets.

When Can the IRS Seize My Assets?

A tax levy is the legal authority the IRS uses to take your property and apply it toward your outstanding tax debt. But before this happens, the IRS must go through a process:

  1. Assessment of Tax Debt. The IRS determines the amount owed.
  2. Notice and Demand for Payment. A bill is sent requiring payment.
  3. Final Notice of Intent to Levy. Issued at least 30 days before seizure. This may also include your right to a Collection Due Process (CDP) hearing.
  4. Opportunity to Resolve. You can appeal, request a payment plan, or apply for relief before the levy takes effect.

Only if you ignore notices and fail to act will the IRS move forward with asset seizure.

What Assets Are At Risk Under a Tax Levy?

If you fail to respond to notices and letters, the IRS can pursue many types of property, but some are more vulnerable than others. Here’s a breakdown:

  • Bank Accounts – High Risk
    Funds in your checking and savings accounts can be frozen and withdrawn almost immediately after a tax levy.
  • Wages – High Risk
    The IRS can garnish a portion of your paycheck directly from your employer until the debt is satisfied or resolved.
  • Retirement Accounts (IRA, 401k) – Medium Risk
    Seizing retirement funds is possible but less common. The IRS typically avoids this unless the tax debt is substantial.
  • Social Security Benefits – Medium Risk
    Through the Federal Payment Levy Program (FPLP), the IRS can take a portion of your benefits.
  • Future Tax Refunds – High Risk
    Refunds are one of the first things the IRS will intercept if you owe back taxes. This is also known as tax refund offset.
  • Vehicles & Personal Property – Medium Risk
    Cars, boats, or valuable collections may be seized, though the IRS often weighs the effort and cost.
  • Artwork, Jewelry, and Collectibles – Low to Medium Risk
    The IRS can seize these, but only if they have significant value and other assets aren’t available.
  • Primary Residence – Low Risk
    Although legally possible, seizing your home is extremely rare and usually only happens in cases of fraud or large-scale tax evasion.

Assets the IRS Cannot Seize (Off Limits)

Some property is legally protected from being levied, including:

  • Certain household goods and personal effects (up to a value limit)
  • Tools necessary for work or trade (again, up to a limit)
  • Unemployment benefits
  • Certain disability payments
  • Workers’ compensation benefits
  • Limited amounts of wages needed for basic living expenses

How to Avoid Asset Seizure (Tax Levy)

If you’ve received a levy notice, the worst thing you can do is ignore it. The good news: you have options.

  • Pay the Balance in Full. If possible, paying your debt immediately stops levy actions.
  • Set Up a Payment Plan. An installment agreement allows you to pay off your debt in manageable monthly payments.
  • Request an Offer in Compromise. This program may allow you to settle your tax debt for less than the full amount owed.
  • Apply for Currently Not Collectible (CNC) Status. If you can prove financial hardship, the IRS may pause collections.
  • Seek Professional Help. A qualified tax relief professional can represent you before the IRS, explore your best options, and protect your assets.

Final Thoughts

The IRS has broad powers to collect unpaid taxes, but you are not powerless. Understanding which assets are most at risk and taking quick action can prevent devastating financial consequences. If you’re facing the possibility of an IRS levy, don’t wait – working with an experienced tax professional can make all the difference in protecting your property and achieving a resolution.