What the IRS Cannot Take With a Notice of Levy

What the IRS Cannot Take With A Notice of Levy

Property exempt from an IRS Notice of Levy

When a tax debtor is unable to meet his or her federal tax obligations, one of the remedies that the Internal Revenue Service (IRS) has at its disposal is the ability to levy on the assets of the debtor in order to satisfy that tax obligation. However, despite the general rule that all property and property rights that belong to the tax debtor may be levied upon for payment of outstanding tax obligations, the law provides that certain property is exempt from an IRS levy. Internal Revenue Service, Internal Revenue Manual, 5.17.3.4.1 (01-07-2011), available at http://www.irs.gov/irm/part5/irm_05-014-001.html.

Internal Revenue Code (IRC) § 6334 governs what property is exempt from an IRS levy. Those exempted items include:
1. Wearing apparel and schoolbooks necessary for the taxpayer or his or her family members
2. Fuel, provisions, furniture, and personal effects not to exceed $8,570 in value
3. Books and trade, business, or professional tools not to exceed $4,290 in value
4. Unemployment benefits
5. Undelivered mail addressed to any person
6. Certain annuity and pension payments
7. Workmen’s compensation
8. Judgments granting child support for minor children
9. Minimum exemption for wages, salary, and other income
10. Certain service-connected disability payments
11. Certain public assistance payments
12. Assistance under Job Training Partnership Act
13. Residences exempt in small deficiency cases and principal residences and certain business assets exempt in absence of certain approval or jeopardy
26 U.S.C. § 6334(a), available at http://www.law.cornell.edu/uscode/text/26/6334.

The maximum aggregate amounts listed above, such as the aggregate amounts for fuel, provisions and furniture, and the aggregate amounts of books and trade, business, or professional tools, are subject to change on a yearly basis. Thus, while it is useful to understand more generally what property is exempt from an IRS levy, a more detailed understanding of exactly what assets are exempt may necessitate the assistance of a licensed tax attorney. Furthermore, while it is useful to understand what property is and is not subject to an IRS levy, a quick review of the list provided above should not be a reason to ignore IRS demand letters and avoid cooperating with the IRS. Rather, it is designed to explain the taxpayer’s rights in relation to the IRS, and can help a tax debtor understand whether he or she has been presented with a legal issue worthy of further consideration by an experienced tax professional like Richard Schickel, call today 520-668-3243.

Sometimes the argument can be made that if certain tools or vehicles are used for “the production of income” needed to sustain the taxpayer, those may also be considered to be exempt from the levy. But this is rare.

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