IRS Seizure of Taxpayer Property:

Effective, but Not Uniformly Applied

GGD-78-42: Published: Jul 31, 1978. Publicly Released: Oct 27, 1983.

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The Internal Revenue Service (IRS) has broad authority under the law to levy upon or seize the property of those who neglect or refuse, after notice and demand, to pay their taxes or to remit trust fund taxes. A review was conducted of IRS seizure cases closed in 1975.

Seizure was used infrequently by IRS, and sale of seized property was even more infrequent, but seizure was an effective means of enforcing collection of delinquent taxes. IRS is required to establish a minimum price it will accept in the event that seized property is declared purchased by IRS in order to protect taxpayers' ownership interest. This is not always done because the minimum price cannot exceed taxpayers' liability and the minimum price is often set too low. Setting minimum prices at a level so low that it is very unlikely that property will have to be purchased for the Government bypasses the intent of the law. IRS often undervalued seized property. Third-party interests were not always protected because IRS did not advise landlords that they may be entitled to rent payments for storing seized property on their premises, and purchasers did not always understand that property might be encumbered by lienholders. Seizure action varied among IRS districts in: the type of taxpayers seized against, timeliness, taxpayers' awareness of appeal rights, factors considered in seizure decisions, and the extent to which planned sales were advertised. In many instances of seizures, alternative collection actions should have been explored.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: The IRS should: require its revenue officers to notify taxpayers, sufficiently in advance of the sale date, of what the minimum price is and of the possibility that the property could sell at that price; use professional appraisers or other qualified people, or provide valuation training for valuing seized property; encourage the use of extra advertising to attract more bidders to tax sales; advise landlords that a fair rent will be paid to store seized property on their premises and prospective buyers of the possibility of encumbrances; establish criteria for timeframes for accomplishing steps in collection procedures and for more accurate property valuation; and increase the use of the separate accounting and penalty provisions of the Internal Revenue Code. Congress should amend the law to permit IRS to return unsold property to taxpayers when IRS determines, prior to sale, that it is highly unlikely that the property could be resold for the minimum price.

 

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