IRS Seizure of Business Assets: The Approval Rules That Protect Sole Proprietors

Seizing a business's equipment is the IRS's most disruptive collection tool, because it can end the income that would have paid the debt. Congress recognized that and built in an extra layer of review for individuals who run businesses. The rule lives in IRC 6334(a)(13)(B)(ii) and IRC 6334(e)(2), and the Internal Revenue Manual implements it in IRM 5.10.2.4 and 5.10.2.5.

If you are a sole proprietor and a revenue officer has mentioned seizure, this page explains what the IRS must do first, and where you have room to push back. If your business has already been warned about a shutdown more generally, the broader picture is in the IRS wants to close my business.

The rule in the statute

IRC 6334(a)(13)(B)(ii) exempts from levy "tangible personal property or real property (other than real property which is rented) used in the trade or business of an individual taxpayer," except as provided in IRC 6334(e).

IRC 6334(e)(2) lifts the exemption only if one of two things is true:

• a district director or assistant district director personally approves the levy in writing, which the current regulation and IRM describe as an area director; or
• the IRS finds that collection of the tax is in jeopardy.

And the approving official may not approve unless the official determines that the taxpayer's other assets subject to collection are insufficient to pay the amount due, together with the expenses of the proceedings. Treasury Regulation 301.6334-1(e) repeats that requirement.

That last condition is the heart of the protection. Business property is supposed to be the last resort, not the first target.

What counts as business property

IRM 5.10.2.5 says the approval level depends on how the asset is used, not on what kind of tax is owed. It gives examples that show how broad the category is:

• a sole proprietor's restaurant tables, chairs, kitchen equipment and liquor license;
• real property with a dock used to run guided hunting and fishing trips as a sole proprietorship;
• a vehicle a self-employed real estate agent uses for business, even when the debt is personal income tax;
• the contents of a cash register used in an individual's business.

The IRM treats a liquor license as a tangible asset for this purpose. It also says that if the asset is a state commercial fishing or wildlife license, the revenue officer must consider the future income that could be earned under the license as part of your other assets, which mirrors a special rule Congress enacted in 1998.

What does not get this protection

The rule is written for an "individual taxpayer." Property owned by a corporation is not an individual's business property, so it falls under the ordinary seizure approval rules instead. Every seizure still requires managerial approval and the full investigation described in how seizure and sale works, but the area director and insufficient-assets requirements in IRC 6334(e)(2) are specific to individuals.

Rented real property is also carved out. IRM 5.10.2.4 notes that seizing rented real property requires only group manager approval. A building you lease to tenants is investment property, not property used in your trade or business in the statute's sense.

Separately, books and tools of a trade have a small absolute exemption. For 2026, IRC 6334(a)(3) as adjusted by Rev. Proc. 2025-32 protects up to $5,990 of books and tools necessary for your trade, business or profession. That is covered in property exempt from levy.

When the IRS considers seizing business assets

IRM 5.10.1.4 lists the profiles the IRS treats as "won't pay" and therefore as seizure candidates. For businesses, the one that matters most is pyramiding: continuing to accrue new liabilities, often payroll taxes, while old ones go unpaid. Others include refusing to provide financial information, refusing an available installment agreement, and repeatedly defaulting on commitments without a valid reason.

The same IRM section lists who should not be seized from: taxpayers who will pay in full within a reasonable time, who need a reasonable period to sell an asset or get a loan, who submit a processable offer while in filing compliance, who qualify for an installment agreement, or who cannot pay and have no seizable assets. It also says seizure will not be pursued if it would create an economic hardship as the regulations define it.

For an operating business, the practical message is clear. Stop the new liabilities first. A business that is current on its deposits and filings is in a far stronger position to argue that a seizure is unnecessary.

The approval package and the insufficient-assets finding

Because the area director must find that your other assets are insufficient, the revenue officer has to document what those other assets are. That is where your financial disclosure matters. If you have bank accounts, receivables, non-business real estate, or the ability to borrow, the official reviewing the package is being asked to approve a seizure of business property despite those resources.

The pre-seizure investigation under IRC 6331(j) also applies. The revenue officer must verify the liability, confirm the expected costs will not exceed the property's value, determine there is enough equity to produce net proceeds, and thoroughly consider alternatives. IRM 5.10.1.5.3.1 says the equity analysis generally uses 60 percent of fair market value, less senior liens and expenses. Equipment with an outstanding loan or a purchase-money security interest often has little equity once the forced-sale discount is applied.

If business assets are seized

Two rights apply specifically to business property.

First, IRC 6343(a)(2) requires an expedited determination on whether to release a levy on tangible personal property essential to carrying on your trade or business, if the levy would prevent you from carrying it on. IRM 5.10.3.10 says taxpayers whose business assets have been seized are entitled to an expedited management review on request, to decide whether the levy meets the release standards in IRC 6343 and whether it has created an economic hardship by preventing the business from operating.

Second, the general appeal right applies. You have 10 business days from the date the Notice of Seizure is provided to request a Collection Appeals Program hearing on Form 9423, according to IRM 5.10.3.10.

IRM 5.10.3.11 also says the taxpayer's employees may remove their personal property, and the taxpayer may remove business books and records without the revenue officer inspecting them. If the IRS wants to examine those records, the IRM directs the revenue officer to consult counsel about whether to issue a summons.

Perishable goods

Inventory that will spoil gets different treatment. Under IRC 6336, perishable goods can be sold quickly rather than under the normal sale timeline. IRM 5.10.1.7 explains that after the Taxpayer First Act in 2019, the perishable category is limited to tangible personal property that is liable to perish, such as food, flowers, plants or livestock. Property that merely loses value over time, or is expensive to store, no longer qualifies. A perishable goods seizure requires approval at the director level under IRM 5.10.2.6.

Practical defense

If a revenue officer is moving toward seizing your business assets, these steps matter most:

• Get current. Make this period's deposits and file missing returns. Pyramiding is the factor that turns a collection case into a seizure case.
• Put a real alternative on the table: an installment agreement sized to verified cash flow, an offer, or a plan to borrow against or sell a non-essential asset.
• Make sure your financial statement is accurate and complete. The insufficient-assets finding depends on it.
• Know the equity math. If secured lenders and the forced-sale discount leave nothing, say so with documents.
• If a seizure happens, ask immediately for the expedited management review and calendar the 10-business-day appeal deadline.

The firm's main site has a broader discussion of IRS problems for small businesses. On seizure specifically, remember the statute's logic: your business property is supposed to be the IRS's last option. Your job is to show, with paper, that it has better ones.