In many cases, taxpayers attempt to transfer assets or property to third persons to shield those assets and property from the federal tax lien or federal tax levy. Predictably, the IRS has various tools at their disposal to attack the transfer, including seeking a court order to set aside the transfer or, in other cases, to go directly against the recipient. This Insight discusses some of the more common options utilized by the IRS in these circumstances. It also discusses the potential criminal liability associated with transferring assets or property to evade taxes.
The FDCPA
Transfers by taxpayers to third parties may be attacked by the IRS under the Federal Debt Collection Procedures Act of 1990, Pub. L. No. 101-647 (the “FDCPA”). Under this statute, if a taxpayer owes a tax liability to the United States and subsequently transfers property to another person, the United States may seek to attack the transfer as “fraudulent” if: (1) the person makes the transfer without receiving reasonably equivalent value in exchange for the transfer; and (2) the taxpayer is insolvent at the time of the transfer or is rendered insolvent as a result of the transfer. See 28 U.S.C. § 3304(a).
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