Payment of taxes is never a pleasant activity, but it is a necessary one. Ideally, everyone would be assessed the correct amount of tax and be able to pay it on time. In the real world, this does not always happen. Individuals and small businesses encounter financial difficulties, cash flow problems, make mistakes and suffer from inadvertent errors with regard to their tax obligations.
This leads to the IRS and state tax authorities' collection activities. Audits, tax liens, levies and seizures may follow. When the IRS seizes real or personal property, they will eventually sell them at auction to satisfy the tax debt.
To ensure that the taxpayer receives the full value of the assets seized, the IRS has set up procedures that they are supposed to follow during the process. They have a specific individual, the Property Appraisal and Liquidation Specialist (PALS), who is responsible for handling many of the details of the sale.
Treasury Inspector General for Tax Administration (TIGTA) recently audited the process to examine how the IRS was dealing with the assets it seized. The good news, according to the audit, was that the IRS "properly safeguarded and accounted for seized taxpayer property."
The TIGTA did find room improvement. The IRS should create more detailed inventories of what is being sold and noted that for seized vehicles, procedures need to be established to remove GPS information and the ability to open taxpayer's garage doors from these vehicle.
Additionally, the sales plans that are developed should be more detailed, to provide better supervisor oversight and prevent indirect expenses from being charged to a taxpayer.
The seizure and sale of a taxpayer property is a drastic remedy and if you find yourself or your business in an untenable financial position, you should discuss your situation with a tax attorney before it reaches this point. An attorney can examine whether options, such as an installment payment plan or an Offer in Compromise, could help avoid the seizure of your assets.
Source: treasury.gov, "Seizure Sale Procedures Were Not Always Followed and Can be Improved," Treasury Inspector General for Tax Administration, August 31, 2015