Taxation & Estate Planning

How common are IRS mistakes in property seizures?

By howardlevy

The IRS appears to be human, and it makes legal and administrative errors when seizing property, says the Treasury Inspector General for Tax Administration (TIGTA).

TIGTA just completed a review of 50 IRS property seizures to determine if they complied with the requirements of Internal Revenue Code sections 6330 to 6344 and Internal Revenue Manual guidelines.

Here is what was found:

1.   IRC 6330(a) requires the IRS to issue a Notice of Intent to Levy and give taxpayers the right to a hearing and court review before issuance of an actual levy. The report found that the IRS issued an actual levy (Form 633B) to seize property for tax periods that were not on the Notice of Intent to Levy.

2.   IRC 6342(a) requires the proceeds of sale to be applied in the following order:  (1) expenses of the sale (2) to any unpaid tax due from the property (like an excise tax on a truck) and (3) to the liablity for which the property was sold. TIGTA found three instances where the proceeds were applied to a tax period not on the actual levy (Form 633B) and three cases where the proceeds were not posted to expenses.

3.   Other instances included failures to properly advertise the sale pursuant to IRC 6335(b) and not always providing Notices of Seizure with accurate liability balances or a correct accounting of the property seized as required by IRC 6335(a).

It should be noted that TIGTA did not identify any instances in which the taxpayers were adversely affected, but the report did state that not following the legal and internal guidelines could result in abuses of taxpayers? rights. An example would be a property seizure without the issuance of a required Notice of Intent to Levy (like #1, above).

The IRS currently makes about 600 seizures a year - a small number compared to the 10,000 the IRS would annually make in the 1990s.  IRS seizures are usually the result of a lack of cooperation or failure to draw out substantial equity in property.  If you are this deep into it, it is important to understand your rights and how to protect them.l

Full post as published by IRS and the Law on June 20, 2009 (boomark / email).