Posted On May 14, 2018
Assets That May Be Exempt from IRS Tax Liens

Assets That May Be Exempt from IRS Tax Liens

The IRS has the right to seize assets through a tax lien to get the money taxpayers owe, but for taxpayers who are facing IRS tax liens, a number of assets are considered exempt from the lien. These exemptions help keep the taxpayer from becoming destitute. Understanding those assets that are protected will ease some of the fear that taxpayers face when they are notified of a tax lien against them.

Assets Required for Living Are Exempt

The first category of assets that are exempt from IRS tax liens are those items that are needed for the individual to live. This includes up to $7,700 worth of furniture, personal effects, fuel, food, and similar provisions. It also includes tools for work or school up to $3,860, books for school or business, and non-luxury clothing. Any particularly high-value clothing items, such as designer bags or shoes, may not be exempt.

Income and Benefits Are Exempt

The IRS does not want to turn a taxpayer into a pauper, so the government exempts some benefits and income. All taxpayer income can be seized except for that which is needed to live based on the cost of living in the area. If the taxpayer is receiving unemployment, 85 percent is exempt. Any ERISA retirement plans are exempt, as are Workers’ Compensation payments and benefits from the Congressional Medal of Honor or the Railroad Retirement Act. Court-ordered child support, welfare, SSI payments, and other public assistance payments are exempt as well. Those receiving disability may be exempt, but not all disability payments are so these taxpayers will need to double check.

Non-Exempt Assets That Are Usually Safe

A taxpayer’s home or retirement funds are not exempt from a tax lien. However, the IRS typically takes these assets last. In order to take a primary residence, the IRS will have to file a court order, which is a different process than other garnishments. Vehicles are typically seized, but taxpayers can work with an attorney to apply for an exemption if they need it to get to school or work. These laws are designed to give the IRS access to the money it is owed, without making it impossible for the taxpayer to get back on his or her feet after the tax lien.