Inspector General Finds Errors in IRS Property Seizures

Register now

The Treasury Department’s Inspector General for Tax Administration found errors and legal violations in nearly half the IRS taxpayer property seizures it studied for a new report.

A review of a random sample of 50 of the 610 seizures conducted by the IRS between July 1, 2007, and June 30, 2008, found that the IRS usually complied with the numerous legal and internal guidelines when conducting the majority of seizures. However, in 23 of the 50 seizures studied, there were 26 instances in which the IRS did not comply with a particular Tax Code requirement. Because there can be numerous statutory violations in each case, TIGTA acknowledged that the 26 instances represent an error rate of only about 1.5 percent. The inspectors did not identify any instances in which the taxpayers were adversely affected, but TIGTA noted that not following legal and internal guidelines could result in abuses of taxpayer rights.

After property is seized, the IRS is required to provide the taxpayer with a Notice of Seizure that specifies the liability for which the seizure was made and an accounting of the property seized. The liability should be the total amount due for the taxes and tax periods listed on the levy. However, in 11 cases, the Notice of Seizure provided to the taxpayer did not show the correct liability.

Money realized from the seizure of property is supposed to be applied first to expenses of the seizure and sale, second to any unpaid tax imposed by IRS law against the property seized, and finally against the liability for which the seizure was made. However, TIGTA identified seven instances in which the expenses and proceeds were not properly applied to the taxpayer’s account. There is currently no procedure on the Post-Seizure Review Checklist to verify that expenses and proceeds are being applied as required.

TIGTA recommended that the IRS include an instruction on the Notice of Seizure form in the “Amount” field that the total should be the same as on the levy form, and include a requirement on the Post-Seizure Review Checklist form that the reviewer verify that the proceeds have been posted as required. In response, IRS management agreed with the recommendations.

For reprint and licensing requests for this article, click here.
Tax practice