Criminal Defense Lawyers

Can the IRS Seize Assets During a Criminal Tax Investigation?

The short answer is yes. The more complete answer is terrifying.

The IRS doesnt need to convict you of anything before taking your property. They dont even need to charge you. Through a legal mechanism called civil forfeiture, the government can seize assets based on the suspicion that those assets are connected to criminal activity – before youve had your day in court, before youve been proven guilty, before anyone has decided wheather you actually did anything wrong.

Your accounts can be frozen tomorrow. Your business assets can be seized next week. And by the time you realize whats happening, the money you needed to mount a defense may already be gone.

Welcome to Spodek Law Group. Our goal is to explain how the IRS seizes assets during criminal investigations, what they can and cannot take, and what you can do to protect yourself. Todd Spodek has represented clients whose assets were frozen during federal investigations. Understanding your rights before seizure happens could save everything you own.

If you’re under criminal tax investigation – or if your assets have already been frozen – call us at 212-300-5196 immediately. Time is critical in asset seizure situations.

Yes, They Can Seize Assets Before Conviction

Civil forfeiture allows the government to seize property without ever convicting the owner of a crime. The legal theory is strange: the property itself is treated as “guilty.” The case is literally against the property, not against you. Thats why you see case names like “United States v. $50,000 in Currency.”

This matters because the standard of proof is lower. To convict you criminally, prosecutors must prove guilt “beyond a reasonable doubt.” To seize your assets civilly, they only need “preponderance of evidence” – basically, more likely than not.

You can win your criminal case – be found not guilty, have charges dismissed, never even be charged – and still lose everything to civil forfeiture.

The property is considered “involved in” unlawful activity. If the government believes your bank account contains money from tax evasion, or your house was purchased with unreported income, they can seize it. Your innocence is separate from the property’s “guilt.”

Heres the practical reality during a criminal investigation:

1. IRS Criminal Investigation opens a case
2. Grand jury subpoenas gather your financial records
3. Government identifies assets connected to alleged crime
4. Assets are frozen or seized – often without warning
5. You learn about it when your card declines
6. Criminal investigation continues while you’re financially paralyzed

The seizure happens early. The resolution comes years later. You spend the intervening time unable to access your own money.

The Presumption of Innocence Problem

Youre supposed to be presumed innocent until proven guilty. But civil forfeiture doesnt work that way. The burden shifts to you. The government seizes your property, and then YOU have to prove it wasnt connected to criminal activity.

This creates an absurd situation. You’re innocent until proven guilty in the criminal case. But your property is guilty until you prove it innocent. The same assets, the same allegations, two different presumptions.

And proving your property innocent costs money – money the government may have already seized. The system is designed to make challenging seizures difficult.

The Timing Advantage

The government chooses when to act. They investigate in secret. They gather evidence for months or years. Then they strike – freezing accounts, seizing property – at the moment most advantageous to them.

You dont get to prepare. You dont get advance warning. The investigation thats been building in secret suddenly becomes real when you cant pay your mortgage, cant make payroll, cant access your own money.

This timing advantage is deliberate. By the time you know about the investigation, the government has already positioned itself to control your assets.

Levy vs. Forfeiture – Two Different Powers

The IRS has two separate powers to take your property, and understanding the difference matters for your defense.

Civil Levy (Tax Collection)

Under 26 USC § 6331, the IRS can levy your property to collect unpaid taxes. This is a collection tool – theyre taking your assets to satisfy a debt.

Levy characteristics:

• Requires assessment of tax liability first
• Notice requirements: Final Notice of Intent to Levy
• 30-day warning period before most levies
• No court order needed
• Subject to exemptions (certain property protected)
• One-time levy (bank account) vs continuous levy (wages)
• Limited to amount of tax owed plus penalties and interest

Criminal/Civil Forfeiture (Crime-Related)

Under 18 USC § 981 (civil) and § 982 (criminal), the government can seize assets connected to criminal activity. This is punishment – theyre taking your assets because they believe those assets came from crime or were used in crime.

Forfeiture characteristics:

• Civil forfeiture: no conviction required
• Criminal forfeiture: requires conviction first
• Lower burden of proof for civil forfeiture
• Can freeze assets during investigation
• Not limited to tax debt – takes all “tainted” assets
• Innocent owner defense available

The Dual Track Reality

Heres what catches people. You can face BOTH simultaneously. The levy collects what you owe in taxes. The forfeiture takes what you allegedly gained from the crime. Same assets, two different legal theories, double the threat.

Your $500,000 in a bank account can be levied to collect $200,000 in unpaid taxes AND forfeited as proceeds of tax evasion. Different legal mechanisms, same result: you lose everything.

How Bank Account Freezing Actually Works

The process that leads to frozen accounts often begins long before you know you’re under investigation.

The SAR-to-Seizure Pipeline

Financial institutions are required to report suspicious activity to FinCEN (Financial Crimes Enforcement Network). If you structure deposits to stay under the $10,000 reporting threshold, your bank files a Suspicious Activity Report (SAR).

Heres the critical point: banks are prohibited from telling you they filed a SAR. You have no notice. You have no opportunity to explain. The report goes to the government without your knowledge.

IRS Criminal Investigation receives SARs. They open cases. They issue grand jury subpoenas for more records. They build their case – all while you have no idea anything is happening.

By the time they freeze your accounts, they may have been investigating for months.

The 21-Day Hold

When the IRS levies a bank account, the bank freezes the funds for 21 days. During this period:

• You cannot access the money
• The IRS cannot take the money
• You have 21 days to contest the levy

After 21 days, if you havent successfully challenged the levy, the bank sends the money to the IRS.

But for criminal forfeiture freezes, the timeline is different. Assets can be frozen for the duration of the investigation. That might be months. That might be years.

The Financial Institution Reality

Your bank is not your ally in this situation. Banks file SARs when they see unusual patterns. Banks freeze accounts when the government requests it. Banks send funds to the IRS without your consent.

The financial system you trusted to hold your money becomes the system that delivers it to the government.

Multiple Banks, Same Problem

Having accounts at multiple banks doesnt protect you. The IRS can issue levies to every financial institution where they discover you have assets. Spreading money across banks only means you’ll face freezes at multiple institutions simultaneously.

And the IRS has tools to find your accounts. Financial institutions report interest income. The IRS matches these reports against your returns. They know where you have money – often before you realize they know.

The International Dimension

Foreign accounts add complexity but not necessarily protection. The IRS has agreements with many countries to share financial information. FBAR reporting requirements mean the government may already know about your offshore accounts.

Attempts to hide assets abroad can actually make things worse. Unreported foreign accounts create additional criminal exposure. The attempt to protect assets becomes another crime to prosecute.

What the IRS Can and Cannot Seize

Understanding exemptions and limitations helps you know where you stand.

What They Can Seize:

• Bank accounts and financial assets
• Wages (continuous levy takes percentage of each paycheck)
• Business assets
• Real estate (including rental properties)
• Vehicles
• Retirement accounts (with additional procedures)
• Social Security benefits (up to 15%)
• State tax refunds
• Investment accounts
• Life insurance cash values

Property Exempt from Levy (IRC § 6334):

• Basic furniture, personal effects, clothing (up to $9,850 for joint filers)
• Tools necessary for trade or business (up to $3,125)
• Books and personal effects needed for school
• Certain unemployment benefits
• Workers’ compensation benefits
• Child support payments
• Minimum weekly exempt income (varies by family size)

Primary Residence Protections

Seizing your primary residence requires a court order. The IRS must get approval from a federal judge and must demonstrate that other collection options have been exhausted. This is a last resort – but it does happen.

Some states have homestead exemptions that protect a certain amount of home equity. Texas, for example, protects up to $500,000 for couples. But these exemptions apply to civil collection, not always to criminal forfeiture.

Retirement Account Complications

ERISA-protected 401(k) plans have some protection. The IRS cant seize them as easily as a regular bank account. But that doesnt mean theyre safe.

If you can access the funds – if you’re over 59½, if you have hardship withdrawal rights – the IRS can levy the account. You’ll owe the taxes, the penalties for early withdrawal, and the IRS will still take what remains.

The retirement protection you thought you had often has a government-sized hole in it.

Joint Account Complications

If you share accounts with a spouse or family member, the entire account can be frozen or levied – even if the other person has nothing to do with the alleged tax problems. The innocent co-owner has to fight to get their share released.

This creates pressure on families. The spouse who did nothing wrong suddenly cant access money. Children’s college funds may be frozen. The investigation of one person affects everyone connected to them financially.

Business vs. Personal Accounts

If youre accused of commingling personal and business funds, the IRS may seize both. Business accounts that you argue are separate from your personal finances may be treated as fair game if prosecutors can show the business was used in the alleged scheme.

The corporate veil that normally protects business assets can be pierced when criminal activity is alleged. Your LLC or corporation doesnt shield assets if those entities are considered part of the fraud.

The Defense Fund Problem

Heres the cruelest irony of asset seizure. The money the IRS freezes often includes the money you need to pay your defense attorney.

Criminal tax defense is expensive. Complex cases can cost hundreds of thousands of dollars. If your accounts are frozen, how do you pay for representation?

The government knows this. Asset seizure isnt just punishment – it’s a strategic move that hampers your ability to fight back.

By seizing your assets before trial, the government can effectively prevent you from mounting an adequate defense. The seizure designed to punish you also prevents you from fighting the seizure.

Some courts have recognized this problem and ordered the release of funds specifically for attorney fees. But this requires litigation – which requires an attorney – which requires money you may not have access to.

The Grand Jury Information Problem

Grand jury subpoenas gather your bank records in secret. You have no right to know the subpoena was issued. You have no right to contest it. By the time you learn about the investigation, the government already has your complete financial history.

Those records justify the seizure. The information you never knew was being gathered is used against you before you can respond.

The Notice Gap

For civil tax collection, the IRS must give you notice before levying. You get a Final Notice of Intent to Levy. You have 30 days to respond.

For criminal forfeiture freezes, there’s often no advance warning. The first you know is when your debit card declines. The more serious the situation, the less notice you receive.

Protecting Your Assets – What Works and What Doesnt

What Doesnt Work:

Transferring assets after an investigation begins is fraudulent conveyance. Moving money to family members, creating trusts, hiding assets offshore – all of these can make things dramatically worse. You add obstruction charges. You demonstrate consciousness of guilt. You give prosecutors more ammunition.

The strategies that protect assets from regular creditors often fail against the IRS. What shields you from lawsuits may not shield you from the government.

What Might Help:

• Collection Due Process (CDP) Hearing: For tax levies, you have the right to request a hearing before the IRS Office of Appeals. This must be requested within 30 days of the Final Notice.
• Innocent Owner Defense: For civil forfeiture, if you can prove you didnt know about the illegal activity that “tainted” the property, you may recover it.
• Installment Agreement or Offer in Compromise: Pending applications for these programs can pause levy activity.
• Economic Hardship: If the levy would prevent you from meeting basic living expenses, you can request release.
• Compliance: Coming into compliance with current tax obligations strengthens your position.

The 10-Year Statute of Limitations

The IRS has 10 years from the assessment date to collect a tax debt. If they havent levied within that period, collection authority expires. But fraud can toll this limitation – and criminal investigations operate under different rules.

The Business Destruction Cascade

If you own a business, asset seizure can trigger catastrophic consequences:

Business accounts frozen → Cant make payroll → Employees leave → Cant pay suppliers → Contracts defaulted → Customers find alternatives → Business destroyed → Personal liability triggered → Personal assets seized → Nothing left to rebuild with

The cascade happens fast. What took years to build can be destroyed in weeks.

The Personal Cascade

Even without a business, the consequences cascade. Mortgage payments missed because accounts are frozen lead to foreclosure proceedings. Car payments missed lead to repossession. Credit destroyed. Insurance policies lapsed. The financial foundation of your life crumbles while you’re still presumed innocent.

And rebuilding is nearly impossible. Even after a case resolves – even if you’re exonerated – the damage persists. Foreclosed homes dont come back. Destroyed credit takes years to repair. The cascade continues long after the investigation ends.

The Employment Cascade

If you’re employed rather than self-employed, your employer becomes involved. Wage levies require your employer to withhold a percentage of each paycheck and send it to the IRS. This often means your employer learns about your tax problems.

Many professionals face termination when employers discover criminal tax investigations. Financial industry workers, government employees, anyone with security clearances – the investigation itself can end your career before any conviction occurs.

The investigation destroys your income at the same moment it demands payment. The system creates an impossible situation.

What You Should Do Now

If you’re under criminal tax investigation, or if you suspect an investigation may be coming:

Do not move assets. Transfers made after an investigation begins can be reversed and can create new criminal exposure.

Consult a criminal tax attorney immediately. Before assets are frozen, before your options narrow, before you make mistakes that cant be undone.

Document everything. Legitimate sources of funds, business records, anything that supports the legal origin of your assets.

Understand your accounts. Know what you have, where it is, and what exemptions might apply.

Plan for the possibility. What would you do if your accounts were frozen tomorrow? Having a plan is better than having a crisis.

Spodek Law Group is located in the Woolworth Building at 233 Broadway in Manhattan. We handle federal criminal tax defense nationwide, including asset seizure situations. If your accounts have been frozen, if the IRS is investigating you, or if you need to protect your assets before a situation escalates – call us at 212-300-5196.

Todd Spodek has represented clients whose assets were seized during criminal investigations. Some cases, we got funds released for legal defense. Some cases, we challenged the seizure and recovered property. Some cases, we negotiated resolutions that preserved what could be preserved. The outcome depends on acting fast – before assets are gone, before options disappear, before the damage is complete.

The IRS can seize your assets before convicting you of anything. Understanding this reality is the first step toward protecting yourself.

Call us today. The consultation is free. The cost of losing everything to asset seizure is incalculable.