Can the IRS Suddenly Seize My Property During an IRS Criminal Investigation?

A common concern for individuals facing potential federal charges after they're notified they're under an IRS criminal investigation for any allegation (tax evasion, tax fraud, IRS fraud, false tax return, conspiracy to defraud, etc.) is whether the IRS criminal investigators can simply seize your assets.

Can they take my money out of my bank account? Can they seize my car or home or other property? Can they close down my business? The answer to each is no. An IRS criminal investigation is just an IRS agent deciding your case should be investigated for potential criminal violations. And IRS criminal investigation statistics show the IRS puts at least one innocent person every single day under investigation. An IRS criminal investigation is not grounds to seize anything.

In fact, the IRS always has to follow certain procedures by law before it can claim you owe them a debt or try to seize money, bank accounts, a home, a car, a business or any other property. Announcing a criminal investigation is not a lawful shortcut to going through the process of determining whether you owe taxes, what amount you owe, and whether the IRS can try to collect for any tax debt.  This process is generally known as “assessment” and “collection” within the IRS tax laws, rules and procedures. And, remember, following the tax laws in avoiding taxes is entirely lawful — and is as much an American pastime as apple pie and Samuel Adams.

Before the IRS can claim you owe taxes, it must have one of the following:

  1. Agreement: your agreement that you owe taxes (such as an amount you list on your tax return as due);
  2. Audit: the IRS conducts an audit that reviews your financial records and gives you a chance to make your side of the argument — yoou have the chance to make your case with the auditor, then again with his supervisor, then again with his appeals officer, and then again with the U.S. Tax Court, and then again on appeal;
  3. Jeopardy Assessment. (See Below).

Before the IRS can try to collect any any alleged tax debt, the tax laws require that the IRS:

1. Have an assessment already recorded showing the amount due;

2. Give you notice of your right to a hearing, called a “Collection Due Process Hearing;”

3. and hold a Due Process hearing before seizure can take place;

A "jeopardy" procedure is the only shortcut to an IRS seizure from the normal process of determining whether you owe taxes, what amount of taxes you owe, and the right to consider collection alternatives. Jeopardy procedures require strict compliance and are very rare. The fact of an IRS criminal investigation neither allows nor authorizes a jeopardy assessment.

What is a “jeopardy”?

  1. “Financial insolvency.” In other words, the IRS must show you have inadequate assets to pay any taxes owed. Under the rules, the “financial solvency of the taxpayer must be threatened or appears to be imperiled or there can be no jeopardy.”
  2. Removal of property. Financial insolvency by itself is not enough; the IRS must also show you are “planning to remove property from the United States,” planning to flee yourself, hiding property beyond IRS’ reach, or creating a financial insolvency through “liquidating substantially all assets” in a manner beyond the means of IRS collection.
  3. For each aspect of proof of the tax owed, financial insolvency, and the jeopardy threat, the IRS must have “sufficient, objective facts” — not scattered information or merely subjective opinions.

Jeopardy assessments are very rare, require specialized approvals from the IRS Area Director and Chief Counsel, and can be contested in court, where judges remain skeptical of such jeopardy claims by the IRS.

An IRS criminal investigation is scary enough. Don’t hurt yourself further with decisions about assets and savings thinking the IRS can steal your money without notice and a hearing. You have rights; learn how to protect them. As always, our legal system works best when you have the best defense by your side.