Jan
YES, they can, but most likely they won’t.
The IRS has the ability and legal power to seize your property to force you to pay back your tax debt. Taking your property is one of the most potent and fearful tactics in its arsenal. However, the IRS does not seize any tax debtor’s property any time they like, and there are finite criteria that need to be fulfilled in order for the IRS to use seizure of your property in order to collect your debt.
One of such criteria is that you must have owed a significant amount of tax debt to the IRS to have consideration of property seizure as a method of recollection. If you owe $10,000 in tax debt, the IRS will not seize your property. It is not the quickest nor the most effective method to collect the debt. The IRS can instead use a levy on your wages or funds and investment as a more effective method for debt recollection. However, if your tax debt amount is reaching near the equity of your house or car, the risk of a seizure does increase.
We have to remember that assuming a seizure does occur, the IRS only collects its debt repayment when they sold the house they have seized, not the moment they seized your home. With multiple involvements per seizure, such as the court and property management, there is a long processing time and high costs when a seizure happens. To compensate for that, the IRS values the equity at a lower rate than the fair market rate.
If the equity after the IRS adjustment of your home is not enough to cover your tax debt, the IRS will not seek such a measure to collect its tax debt. If the IRS values your home at $100,000, but your tax debt is $150,000, the IRS will deem your property have no equity and cannot use it as a payment on your tax debt.
However, if the equity after the IRS adjustment is enough to cover the bill of your tax debt, the IRS can proceed with the process of levy to seize your property. An IRS Revenue Office will contact you about the case and make personal visits to your properties. So unless you have been contacted by an IRS Revenue Officer, there is no risk of your properties being seized.
Even if you have been contacted or visited by the IRS Revenue Officer, there are multiple stages for the seizure to occur, and you can work with the officer who handles your case with other methods of repayment. If a resolution is reached, there is no risk of seizure if the repayments are negotiated and can be made. However, if no alternative methods of repayment or effort have been made, the IRS will then send you a Final Notice of Intent to Levy, which will give you 30 days to file an appeal to the IRS. This will escalate your case from IRS’s debt collection department to the appeals department. This will put the ongoing seizure process on hold and more time to negotiate a resolution with the IRS if that hasn’t happened in the earlier stage. The IRS cannot legally seize your property without sending out this notice to you.