Can the IRS take my stuff?

Posted on September 9, 2008
Filed Under Form 433A, IRS Financial Statements, IRS Seizures, Offer in compromise, Property Exempt from Collection |

In the vast majority of cases, you will not lose any of your stuff to the IRS.  Most clothing and personal household belongings are beyond the scope of the IRS collection power.  Here’s why:

Section 6334(a)(1) of the Internal Revenue Code allows you to keep all of your clothing.  Bear in mind that the tax code uses the words “necessary” in describing the clothing that is exempt from IRS collections, meaning that the IRS can technically take clothing that is not necessary, like designer shoes, handbags, etc. (click here for some fancy clothing that the IRS did see fit to seize, and note that this is type of activity is highly unusual). 

Section 6334(a)(2) of the tax code protects your furniture and household effects up to $7,900 in value from the IRS.  The IRS is not taking your television, or your bed, or lawnmower.

The Internal Revenue Manual, at Section 5.17.3.4.7, Property Exempt from Levy, restates these exemptions in guidance to IRS employees.

It is important to remember these exemptions when completing IRS financial statements, like Form 433A. Claim the value of these everyday items as exempt.  And in an offer in compromise, make sure that these assets are not included in the value of the offer as they are off limits to the IRS - again, claim it as exempt. 

Comments

3 Responses to “Can the IRS take my stuff?”

  1. fourlegsandatail on November 6th, 2008 8:13 pm

    Mr. Levy:

    What about household or family pets (not show or exotic animals, but “ordinary” cats, dogs, etc.)?

    I have been told that the IRS indeed does exempt them from any levy or seizure as “personal effects.” Is this true? (What about exempting them as “livestock”?)

    What about a case where the estate of a deceased person is levied upon for taxes, interest, penalties, etc.–but before death, the person gave or willed a pet to someone else? Would the IRS actually go after such a pet?

    In the above cases, if pets truly are not exempt from IRS levy and/or seizure, does the IRS in actual practice take people’s pets from them if it finds cause to do so?

    If so, this is outrageous. Congress should exempt pets from such much as it generally does when it comes to creditors in bankruptcy cases.

  2. fourlegsandatail on November 6th, 2008 8:21 pm

    A related question on pets and taxes–another tax expert has publicly (online) expressed alarm that IRS Form 433-A “necessary expenses” allowances for taxpayers seeking installment agreements or offers in compromise apparently do not include expenses of pet care.

    Realistically, how might this or related federal tax provisions affect the pet(s) of a taxpayer?

  3. howardlevy on November 7th, 2008 11:32 am

    Fear not for your pets. The IRS will not take assets in which there is no net recovery to apply to a liability (Internal Revenue Manual 5.10.1.2). This would include everyday household pets. The IRS does care about its public image, and is not interested in taking your pets.

    But, for example, if there are show dogs that have value, the IRS would have an interest in that. But bear in mind seizures of any type of property other than liquid assets (wages, bank accounts, cash) are more difficult for the IRS and occurs only in egregious cases in which there is no cooperation.

    As to the expenses of pet care, there are many ordinary living expenses that the IRS does not consider to be ordinary, including charitable contributions. It would have to be proven to be necessary, and reasonable under the circumstances. This is very subjective, and is based on the facts and circumstances, the strength of counsel, and the disposition of the IRS employee making the decision (is that person a pet lover and understanding?).

    If the liability can be paid in five years, the IRS has discretion to allow all “unnecessary” expenses, and usually will. Internal Revenue Manual 5.15.1.10.

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