Unlike other creditors, the IRS can deprive you of your property without having to first obtain a Court judgment. It does this using a broad and varied range of lien and levy powers.

IRS Enforcement Power

The IRS is responsible for enforcing the Internal Revenue Code (U.S.C.A. tit. 26), which codifies all U.S. tax laws.

Basic IRS activities include serving and educating taxpayers; determining, assessing, and collecting taxes; investigating individuals and organizations that violate tax laws; determining pension plan qualifications and exempt organization status; and issuing rulings and regulations to supplement the Internal Revenue Code.

Burden of Proof is on the Taxpayer

Historically, Congress has given the IRS unique and wide-ranging powers for administering the U.S. tax system and enforcing its laws. For example, while in a criminal proceeding the government has the burden to prove that the defendant is guilty beyond a reasonable doubt, in a tax proceeding the burden is on the taxpayer to prove that he or she does not owe the amount claimed by the IRS.

Power to Impose Penalties

The IRS also has the power to impose civil penalties for any of a number of violations of tax law. These penalties are seldom employed, however, and with respect to penalties, the IRS bears the burden of proving that the penalty is justified.

Information Gathering Power

The IRS has the power to collect information on U.S. citizens, companies, and other institutions.

The most obvious example of this power is that each year all taxpayers must file tax returns containing detailed financial and personal information.

Many organizations are also required to notify the IRS of any payments they make to individuals; the IRS receives approximately one billion of these third-party reports annually.

IRS Acquisition of Information Without a Warrant

The IRS also has the legal authority to order banks, employers, and other institutions to provide information about a taxpayer without having to obtain a warrant from a judge; other law enforcement agencies, such as the FBI and local police forces, must obtain a warrant in such situations.

Power to Order Withholding at the Source

Another crucial power of the IRS is the ability to withhold taxes automatically from employee paychecks.

The IRS was given this authority in 1943, when Congress passed legislation requiring employers to withhold from employees’ paychecks the income taxes owed to the government. This withholding requirement was one of several actions taken by the government to increase revenue so that it could meet the huge financial requirements for fighting World War II.

Today, automatic withholding accounts for the majority of tax dollars paid to the government, with only a small portion sent in with tax returns by April 15, the IRS annual tax deadline. Automatic withholding is important to the government because it enables it to receive a steady stream of tax revenue.

Withholding is also useful for enforcing voluntary compliance because a tax burden seems less onerous when taxes are subtracted from a paycheck before the check is received.

Federal Law Supersedes State Law

There is no federal definition of “property.” Consequently, the IRS, an arm of the executive branch of the federal government, will defer to state law to determine what constitutes a taxpayer’s property for tax collection purposes.

On the other hand, property (defined as such under state law) that is given a state exemption from seizure (i.e. a taxpayer’s primary residence) is seizable by the IRS because IRS law supersedes state exemptions.

Thus, even in states where primary residences are exempted from seizure by creditors, the IRS will be able to seize a taxpayer’s home and sell it in order to collect a past due tax debt.