What Assets Can The IRS Take From You?

What Assets Can The IRS Take From You?

Facing an IRS tax levy is a heavy burden, but understanding your rights is the first step toward financial relief. For South Asian American households where finances often involve multi-generational income, small business ownership, and assets in both the U.S. and countries like India or Pakistan—the stakes are uniquely high.

While the IRS has broad authority to seize bank accounts, garnish wages, and take property, they rarely take “essential” items. Generally, your clothing, schoolbooks, and basic household furniture (up to a specific value) are exempt from seizure.

In legal terms, an IRS Tax Levy is the actual seizure of property to satisfy a tax debt. Unlike a lien, which is a claim against your property, a levy allows the government to physically take and sell your assets. This guide explores which of your assets are at risk and how the specific financial structures of South Asian families can influence the collection process.

Understanding the IRS Levy: How the Seizure Process Works

Navigating the IRS collection process can be overwhelming, but it is important to understand that a seizure never happens overnight. The IRS follows a strict legal sequence before they can touch your assets. First, they must send a Notice and Demand for Payment. If the debt remains unpaid, the government may file a Federal Tax Lien. It is crucial to distinguish between a lien and a levy: a lien is a legal claim against your property as security for a tax debt, whereas a levy is the actual legal seizure of that property to pay the debt.

The transition from a lien to a levy involves a specific “Step-by-Step” entity breakdown that provides you with a window to act:

  1. The Assessment: The IRS officially records your tax liability.

  2. Notice and Demand: You receive a bill requesting immediate payment.

  3. Final Notice of Intent to Levy: This is the most critical document. By law, the IRS must send this notice at least 30 days before the seizure begins.

  4. Notice of Your Right to a Hearing: Along with the intent to levy, you are typically notified of your right to a Collection Due Process (CDP) hearing.

For South Asian households, this 30-day window is a vital period to seek professional debt relief or negotiate an installment agreement. Acting during this timeframe can prevent the government from freezing bank accounts or garnishing wages, protecting the financial stability of your home and your ability to support extended family.

Liquid Assets: Bank Accounts, Wages, and Retirement

When the IRS moves from “claiming” a debt to “collecting” it, they prioritize liquid assets—money they can access quickly. For South Asian families, this often targets the very funds used for daily survival and supporting relatives abroad.

The Bank Levy: The 21-Day Countdown

Once the IRS issues a bank levy, your financial institution is legally required to freeze the funds in your account immediately. However, there is a mandatory 21-day holding period before that money is sent to the government. This window is critical. For many in our community, bank accounts are not just personal savings; they are “remittance hubs” used to send money back to India, Pakistan, or Bangladesh for aging parents or family property maintenance.

If your account is frozen, any scheduled transfers will fail. You must use these 21 days to prove “economic hardship” or negotiate a release. It is important to note that the levy only “captures” the money in the account on the day the notice is received; deposits made after that date are typically not frozen by that specific levy.

Wage Garnishment: Calculating Your Take-Home Pay

Unlike a one-time bank levy, a wage garnishment is a “continuing levy.” It stays in place until the debt is paid or settled. The IRS does not take your entire paycheck, but they do take a significant portion. The amount you are allowed to keep is determined by IRS Publication 1494.

For 2026, the “exempt” amount the money the IRS leaves for your bills—is based on your filing status and the number of dependents you claim. For example:

  • Single with no dependents: You may only be left with roughly $1,340 per month.

  • Married Filing Jointly with two children: You might keep approximately $2,895 per month.

    Anything earned above these thresholds goes directly to the IRS.

Retirement Accounts: Can vs. Will

A common fear is the seizure of a 401(k) or IRA. Legally, the IRS can levy these accounts. However, their internal policy is to do so only as a last resort. They generally avoid seizing retirement funds if you are making a “good faith” effort to pay or if the seizure would cause long-term financial devastation.

Cultural Nuance: The Risk to Joint Family Accounts

In many South Asian households, it is common to have joint accounts with non-spousal family members, such as a sibling or a parent. If your name is on an account, the IRS legally views you as having a 100% “right to withdraw” those funds. Consequently, they can levy the entire account, even if the money was deposited by your elderly father or a sister. To protect these family members, you must provide meticulous documentation such as deposit slips or direct deposit records to prove the funds do not belong to you and should be released.

Real Estate and Personal Property: Can They Take My Home?

For many South Asian families in the USA, a home is more than just an asset; it is the cornerstone of family stability and a symbol of hard-earned success. The fear of an IRS seizure often centers on real estate and personal belongings. However, the IRS generally views the seizure of physical property—especially a primary residence as a last resort.

Your Primary Residence: The High Legal Bar

The IRS cannot simply knock on your door and evict you. Under IRC § 6334(e)(1), the IRS must obtain a court order from a U.S. District Court judge or magistrate before seizing a principal residence. To get this approval, the government must prove three things:

  1. The tax liability is legally owed.

  2. All administrative procedures (notices and hearings) have been followed.

  3. There are no other reasonable collection alternatives (such as an installment agreement or an Offer in Compromise).

Furthermore, if you owe less than $5,000, the IRS is legally prohibited from seizing your home or any real property. Even in cases involving larger debts, the IRS typically prefers to place a Tax Lien on the home, which ensures they get paid when the house is eventually sold or refinanced, rather than forcing an immediate sale.

Vehicles: Essential Commuting vs. Luxury Equity

The IRS evaluates vehicles based on two factors: Equity and Utility.

  • Daily-Use Vehicles: If your car is essential for commuting to work or taking children to school, the IRS is highly unlikely to seize it, especially if it has little equity (e.g., if you are still making high monthly loan payments).

  • Luxury or Secondary Vehicles: If you own a high-value “luxury” car or a second vehicle with significant equity, it is a much more attractive target. If the cost of seizing and selling the car is less than the potential profit, the IRS may proceed with a levy.

Business Assets for Self-Employed Individuals

Many South Asian Americans operate small businesses, from retail stores to consulting firms. The IRS can seize business inventory and equipment, but they must follow strict protocols.

  • Tools of the Trade: There is a statutory exemption for “tools of a trade, business, or profession.” As of 2026, the first few thousand dollars of the value of these tools is typically protected.

  • Economic Viability: A Revenue Officer must document that the “Fair Market Value” (FMV) of the seized business assets will significantly exceed the costs of the seizure and sale. If taking your equipment would effectively shut down your business and prevent you from ever paying the debt, you may be able to argue for a Hardship Release.

Can the IRS Seize Overseas Assets or Foreign Bank Accounts?

For South Asian expats and dual citizens, the question of whether the IRS can reach across borders is a primary concern. Many families maintain “Sona” (gold), ancestral land, or savings accounts in India, Pakistan, or Bangladesh. While the IRS’s physical reach is generally limited to U.S. soil, their ability to “track and tax” these assets has never been stronger.

The Role of FBAR and FATCA: The Global Tracking System

The IRS monitors foreign wealth through two powerful regulatory frameworks:

  • FBAR (FinCEN Form 114): If the combined value of all your foreign bank accounts exceeds $10,000 at any time during the year, you must report them.

  • FATCA (Foreign Account Tax Compliance Act): This law requires foreign financial institutions (including major banks in South Asia like SBI, HBL, or HSBC) to report the account details of U.S. persons directly to the IRS.

Because of FATCA, the IRS likely already knows about your offshore accounts. If you have at least $50,000 in foreign financial assets, you must also file Form 8938 with your tax return.

Jurisdictional Realities: Seizing Property in South Asia

Can an IRS agent physically seize a house in Dhaka or a plot of land in Punjab? Technically, no. The IRS does not have the legal jurisdiction to seize real estate located outside the United States. However, they can make life very difficult for you within the U.S. to compel payment:

  1. Passport Revocation: If you owe more than $62,000 (as of 2026) in “seriously delinquent” tax debt, the IRS can certify this to the State Department, leading to the denial or revocation of your U.S. passport preventing you from visiting your family abroad.

  2. Repatriation Orders: A U.S. court can order you to “repatriate” (bring back) funds from a foreign bank account to pay your domestic tax debt.

The High Risk of “Quiet Disclosures”

Some taxpayers try to “quietly” fix their history by filing past-due FBARs or amending old returns without notifying the IRS through an official amnesty program. This is extremely dangerous. The IRS specifically flags “quiet disclosures” for audits. If caught, you may face “willful” penalties, which can be as high as 50% of the account balance or $100,000, whichever is greater. For South Asian families, the better path is often the Streamlined Foreign Offshore Procedures, which allows non-willful taxpayers to come forward with reduced or waived penalties, protecting the family’s global legacy.

What the IRS CANNOT Take: Exemptions You Must Know

While the IRS possesses extensive powers to seize property, federal law specifically Internal Revenue Code Section 6334 provides “statutory exemptions” to ensure that taxpayers are not left destitute. For South Asian households, these exemptions offer a critical safety net for maintaining the household and continuing to earn a living.

Statutory Exemptions: Protecting the Household

The IRS is legally prohibited from seizing specific personal items and household necessities. As of 2026, the following items are generally safe:

  • Necessary Clothing and Schoolbooks: The IRS will not take basic apparel or any books required for your or your children’s education.

  • Fuel, Provisions, and Furniture: Household goods, including furniture, fuel for heating, and food “provisions,” are exempt up to a combined value of $11,710 (adjusted for inflation for 2026).

  • Undelivered Mail: The IRS cannot intercept or seize your mail.

  • Certain Government Benefits: This includes Unemployment Benefits, Workers’ Compensation, and certain public assistance/welfare payments.

Essential Income and Child Support

One of the most important protections involves your paycheck. The IRS cannot garnish the portion of your income required to pay court-ordered child support, provided the order was in place before the levy was issued.

Furthermore, the IRS must leave you with a “minimum exempt amount” for basic living expenses. This amount is calculated based on your standard deduction and personal exemptions (though personal exemptions are currently set to $0, the “senior deduction” or other standard deduction adjustments apply). For example, a married taxpayer filing jointly with two children is permitted to keep a much higher portion of their weekly pay than a single taxpayer without dependents.

Tools of the Trade: Protecting Your Career

For the many South Asian Americans working as independent contractors, doctors, engineers, or small business owners, your professional equipment is protected. The IRS provides an exemption for “books and tools necessary for the trade, business, or profession.” For the 2026 tax year, the first $5,850 of the value of these tools is exempt from seizure. This ensures that even in the midst of a tax crisis, you retain the ability to generate income and work toward resolving your debt.

Specific Financial Challenges for South Asian Families in Debt

South Asian households in the USA often manage complex financial ecosystems that don’t always align with standard IRS categories. Understanding how to navigate these community-specific challenges is vital for protecting your family’s resources.

Documenting Inter-Family Loans

In our community, “handshake” loans between relatives are common. However, the IRS may view large, undocumented transfers as taxable income or seizable assets. To protect these funds, you must treat them with professional formality.

  • The Promissory Note: Create a written agreement specifying the loan amount, repayment schedule, and a minimum interest rate (the Applicable Federal Rate or AFR).

  • Proof of Intent: Without a signed contract, the IRS often reclassifies loans as “gifts,” which could trigger gift taxes or allow them to seize the funds if they are sitting in your account.

Remittance Impact and Emergency Protocols

For many, a portion of every paycheck is a lifeline for family in South Asia.

  • The Remittance Tax: As of January 1, 2026, a 1% tax applies to transfers made via money-transfer apps and service providers (though transfers via U.S. bank wires remain exempt).

  • Levy Risks: If the IRS garnishes your wages or freezes your bank account, your ability to send these vital funds stops instantly. In such emergencies, you can request an Expedited Levy Release by proving that the seizure prevents you from meeting basic necessities or supporting legal dependents, including those overseas.

Immigration and the “Good Moral Character” Clause

A common fear is that tax debt leads to deportation. It is important to know that tax debt is a civil matter, not a criminal one. Being in debt or having a levy does not trigger deportation. However, for those seeking Naturalization (Form N-400), the IRS debt can impact the “Good Moral Character” requirement. To build trust with USCIS, you do not need a zero balance; you simply need to show you are in a formal payment plan (Installment Agreement) and are consistently making payments.

How to Stop an IRS Seizure: Debt Relief Strategies

Receiving a notice of intent to levy is not the end of the road. The IRS prefers receiving a steady stream of payments over the administrative headache of seizing and selling physical property. As of 2026, several strategic “off-ramps” exist to halt the seizure process and protect your assets.

Collection Due Process (CDP): Your Legal Shield

The most powerful tool in your arsenal is the Collection Due Process (CDP) hearing. When you receive a “Final Notice of Intent to Levy,” you typically have a 30-day window to file Form 12153.

  • The “Automatic Stay”: Filing this request timely generally stops all levy actions. The IRS cannot seize your bank accounts or garnish your wages while your case is being reviewed by the Independent Office of Appeals.

  • Cultural Context: This is the ideal time to present “special circumstances,” such as the need to maintain funds for multi-generational care or specific business equipment essential to your livelihood.

Offer in Compromise (OIC): Settling for Less

The Offer in Compromise is often referred to as “pennies on the dollar” settlements. If you can prove that your total assets and future income are significantly less than the debt you owe, the IRS may agree to settle.

  • Qualifying for OIC: You must be current on all tax filings and not in bankruptcy. The IRS evaluates your “Reasonable Collection Potential” (RCP) using strict national standards for housing, food, and transportation.

  • Lump Sum vs. Periodic: You can offer to pay the settlement in five or fewer payments (Lump Sum) or over a period of 6 to 24 months.

Currently Not Collectible (CNC) Status: Proving Hardship

If paying even a small amount would prevent you from meeting “basic living expenses,” you may qualify for Currently Not Collectible status.

  • How it Works: The IRS pauses all collection activities (levies and garnishments).

  • The Catch: Your debt is not forgiven; interest and penalties continue to accrue, and the IRS will take any future tax refunds. However, if your financial hardship persists for the remainder of the 10-year Collection Statute Expiration Date (CSED), the debt may eventually expire.

Installment Agreements: Predictable Monthly Payments

For many South Asian households, an Installment Agreement is the most practical solution. It breaks a mountain of debt into manageable monthly chunks.

  • Guaranteed Agreements: If you owe $10,000 or less, you are usually guaranteed a 3-year payment plan.

  • Streamlined Agreements: For debts up to $50,000, you can often set up a 72-month plan online without having to submit a detailed financial statement (Form 433-F).

  • Partial Payment Installment Agreements (PPIA): If you can’t pay the full amount before the 10-year statute expires, the IRS may allow a lower monthly payment based on your actual ability to pay.

Conclusion: Taking Control of Your Financial Future

Facing the IRS can feel like an impossible battle, but it is important to remember that you have significant legal protections. The IRS’s primary goal is to collect what is owed, and as of 2026, their administrative strategy remains focused on voluntary compliance. They would much rather establish a predictable Installment Agreement or a settlement through the Fresh Start framework than go through the costly and public process of seizing your home or business equipment.

For South Asian households, the key to protecting your assets from local savings to family legacy property is early and honest intervention. Ignoring notices only limits your options. By acting within the 30-day window of a Final Notice, you can halt collection actions and safeguard your family’s stability.

Take Action Today Our team specializes in helping South Asian American families resolve complex tax issues and prevent asset seizure. Schedule a free, confidential consultation with an IRS tax lawyer today to build a defense that protects your future and your family’s legacy.