For the next few weeks, we’re running a “Slice of Life” series where we address real-life problems our clients bring us after they’ve filed their taxes (or not). You can read Part 1 – Slice of Life: I’ve Been Scammed!, Part 2 – Slice of Life: I Hate Filing Quarterly, Part 3 – Slice of Life: I’m Running Scared, Part 4 – Slice of Life: I’m Confused, Part 5 – Slice of Life: I Got Levied, and Part 6 – Slice of Life: Get Rid of My Lien, Please of the series.
SLICE OF LIFE #7: A client calls us and asks, “What are my assets? If the IRS issues me a levy, what can they take?”
Your best asset is a good attitude. OK, not really.
Here’s what The IRS Can Take.
Essentially, your assets are anything you own that can be converted into cash. (Including actual cash, of course.) Anything in your bank, retirement, or investment accounts is an asset. Any account with your name on it (even if it’s a joint account) is an asset. Your real estate and personal property (cars, boats, houses, land, jewelry, furniture) are assets. Assets are grouped into two major categories: liquid (easily converted into cash, like stocks and bonds) and illiquid (can’t be converted into cash without some loss of value, like houses or antiques).
If the IRS levies your property, it can lay claim to any of these assets to pay your tax debt. (You can read more about how levies work here.) The IRS is allowed to take your personal property, your real estate, and any of your property that’s currently being held by another person or entity, like a bank or employer. However, there are some limits. A few, but some.
Here’s What The IRS Can’t Take.
Fortunately, this isn’t Robin Hood. The IRS is not allowed to seize everything you own and throw you in jail, leaving you a penniless pauper. The list of exempt assets includes:
- Basic clothing
- Personal items (up to $7,700 worth)
- Professional equipment or textbooks (up to $3,860 worth)
- 85% of your unemployment benefits
- Any undelivered mail
- Benefits from the railroad or the Congressional Medal of Honor
- Child support payments
- Worker’s comp
- Minimum exemption for salary (in other words, they have to leave you enough wages to pay basic living expenses)
- Social Security and/or welfare
As you can see, this leaves you something… but not much. The IRS is allowed to seize your car, but if you can convince them that you need the car to get to work and pay your taxes, they will usually be willing to negotiate with you. In fact, if you can convince the IRS that any of your assets are necessary to keep you employed and paying the bills, those possessions are less likely to be seized. (We can help you with that part.)
Really, you could say a good tax law firm is your most important asset.
Our goal is to help you work with the IRS to set up a payment plan, make an Offer in Compromise, or get the debt moved to Currently Not Collectible status, so you won’t have to deal with the hardships of a levy. The earlier you talk to us, the more we can do.
If you have questions about a lien or a levy, give us a call at 844-841-9857, or schedule a free consultation here.