Here is a practical question from a reader about a concern of everyday living – IRS seizure of your car to pay your tax debt.
If I own a free and clear vehicle that is ten years old and has 115k miles on it, and it is worth 4,000. Will it be seized if the IRS does a levy and I have no other assets/income for them to take?
The IRS is rarely in the business of taking your car and preventing you from getting to work, the grocery store, or the doctor. To have the IRS interested in a seizure of a vehicle, in most cases, you will have to be in a extreme position of noncooperation. Good communication with a Revenue Officer lowers any risk of the IRS seizing your vehicle.
Speaking of Revenue Officers, unless one has contacted you and is assigned to investigate collection of your tax debt, the chances of car seizure becomes even more remote. This is because the IRS will need local enforcement to investigate the seizure of a car. If all is quiet, or your case in the IRS Automated Collection Service, it is impractical that your car will be seized.
Speaking of practicality, the IRS is most interested in property seizures when it results in some real recovery to them. A vehicle worth $4,000 most likely is not a prime source of recovery for the IRS, especially considering the hardship to you from loss of transportation. A Ferrari would be a different story.
This prohibition on seizures without recovery is in the Internal Revenue Code, specifically section 6331(f), which prevents uneconomical levies. You can also reference Internal Revenue Manual 18.104.22.168, which states that “Seizures where the taxpayer has insufficient equity in property – there must be sufficient net proceeds from the sale to provide funds to apply to the taxpayer’s unpaid tax liabilities.”
Also, keep in mind that Internal Revenue Code 6343(a) prevents an IRS levy if it creates an economic hardship. Seizing a car that will prevent you from going to work creates an economic hardship.
The numbers speak for themselves that the IRS is not usually in the car repo business. For the IRS fiscal year 2009, the IRS made 581 seizures made of real and personal property. With millions of taxpayers in debt to the IRS, seizures of hard assets are relatively rare. Of the seizures made, the vast majority were real estate, with a much smaller percentage out of the 581 being vehicles.
In other words, it is quite unlikely that the IRS wants your car. The same logic applies to your house. The real concern is your wages, bank accounts – liquid assets.