If the IRS thinks I owe taxes, can they take all of my money to repay the debt? How?

There are limits on what the IRS can take. They can only garnish a maximum of 25% of your wages. There are protections for certain amounts of bank accounts, cars, clothes, furniture, etc. 401(k)s and other retirement plans are exempt. However, unless you are a flight risk, the IRS doesn't start by garnishing your wages or seizing your bank account. It starts by sending you letters, notifying you what they think you owe. Your choices are 1. Pay what they claim, 2. Work out a payment plan, 3. Dispute the claim (often the IRS numbers are estimates or you have information on deductions, etc. that the IRS doesn't) or 4. The ever popular "ignore it and hope it goes away" Only if you chose #4 will you find your assets being taken by the IRS.

If the IRS assesses you and you do not take all necessary actions in order to disprove their claim, and the judgment is issued, it is very possible for them to take any and all collection actions which are normal and allowed under law. That would include additional garnishment of your wages and the seizure and sale of your assets. Generally, if they are incorrect, they simply say they are sorry if you are lucky and you get nothing.