When you challenge an IRS collection action, all collection activity must be interrupted during your administrative appeal. A notice of garnishment is another method the IRS can use to collect taxes. Collecting means that the IRS can confiscate and sell property to satisfy a tax debt. This property could include your car, boat, or real estate.
The IRS can also garnish assets such as your salaries, bank accounts, Social Security benefits, and retirement income. In addition, the IRS will apply the federal tax refunds you are owed in the future to offset the amount you owe. Any state income tax refunds owed to you may also apply to your liability. Taxpayers have the right to pay only the amount of taxes legally due, including interest and penalties, and to have all tax payments applied correctly by the IRS.
The IRS tax machine can't and probably won't keep everything it owns. Some items are exempt by law and others are protected by IRS policy considerations. In addition to penalties and interest, there are other things the IRS can do to make you regret not paying your taxes. Your passport could be canceled, for example, which could complicate your travel plans.
In the worst-case scenario, the IRS could impose a lien on your property or garnish your wages. Knowing what's at stake can motivate you to pay. Learn how to request a payment option from the IRS, such as a payment extension or an installment agreement from the IRS, when your business owes taxes and can't pay them. The IRS will issue a release certificate if you pay all of the tax due, exempt it in the event of bankruptcy, or pay it through a commitment offer, or if the deadline for collecting the IRS has run out.
The IRS can confiscate anything not listed above; however, IRS policies discourage collectors from taking certain items. In addition, the Federal Housing Administration (FHA) loan program is another easy route with an FHA IRS payment plan. If Piker Bank sends some of the deposit on Tuesday to the IRS without receiving another notice of garnishment, you will have to reimburse Remington the amount you send to the IRS. The IRS won't know where to look for vehicles, ships, and similar assets if they're not located where the IRS expects them to be.
All mortgages, court liens, real estate taxes, or other taxes on your property at the time of the IRS sale remain in effect after the IRS auction, as long as they were registered before the IRS recorded your federal tax lien notification. The IRS tax exemption on an item does not prevent the IRS from imposing taxes on the same item in the future. The IRS wants all taxpayers to know these rights if they need to work with the IRS on a personal tax matter. If you can convince the IRS that taxing a certain item would not be cost-effective, the IRS could backtrack.
Once the IRS has seized your personal property (not real estate), you can sell it at an IRS auction. To garnish part of your salary, the IRS sends a notice of garnishment to your employer or to anyone the IRS suspects is paying you for your services as an independent contractor. Unless the IRS issues a subpoena, a legal order to file documents or appear at an IRS office, you don't have to disclose the existence or location of your assets. The IRS could also intercept your receivables by notifying your customers to make future payments to the IRS instead of to your company.
However, you must respond to a letter from the IRS threatening to file a tax by contacting the IRS at the phone number listed on the letter, calling 800-829-1040, or calling the Taxpayer Advocate Service. Once a tax is filed, the IRS generally cannot issue a federal tax lien release certificate until the taxes, penalties, interest, and registration fees have been paid in full or the IRS can no longer legally collect the tax.
