IRS Seizure of Assets

Last year, the IRS was found to be in compliance of its own seizure of assets regulations 56% of the time (which if my memory serves me correctly, if were were to assign a letter grade to such performance, the most appropriate letter would be an ‘F’).

But great news. According to the the Treasury Inspector General’s June 29, 2012 report, the IRS has drastically improved! The IRS’ Seizure of Assets rules are now followed 78% of the time, with a mere 11 out of 50 sampled seizure procedures found to be non-compliant.

These were the violations the Inspector General Found:

The sale of the seized property was not properly advertised. (violation of I.R.C. § 6335(b))
The amount of the liability for which the seizure was made was not correct on the notice of seizure provided to the taxpayer. (violation of I.R.C. § 6335(a))
Proceeds resulting from the seizure were not properly applied to the taxpayer’s account. (violation of I.R.C. § 6342(a))
Information relating to the sale of the seized property was either incorrect or not provided to the taxpayer. (violation of I.R.C. § 6340(c))

The Positives?

Well, this is not to say these 14 different code violations (a few of the 11 seizures have multiple problems) did affect the end result. It is unknown if these mistake were what we would call in criminal law, harmless error, and irrelevant to the outcome.

Also, there was a significant improvement over the last year’s F rating.

But what makes me say…this stinks

Well, were those errors really harmless? We really have no idea of knowing.

This is not to say there hasn’t been improvements with collection actions, namely through the IRS Office of Appeals. There certainly have been. But we still find cases and situations where the IRS is clearly doing something wrong and there is no meaningful way to challenge many inappropriate collection actions of the IRS (which, by the way, happen all the time).

Here are a few examples I can think of:

An unlawful forced withdrawal of an offer in compromise (there is NO review for this, aside from pleading with a group and/or a territory managers, which sometimes can be successful).
Unlawful taxpayer contact. Sure, a taxpayer, could file a suit in district court. But seriously, the damage awards are so slight, no attorney can take such cases on a contingency basis. And taxpayers typically don’t have the resources to pay an attorney out of pocket to bring such a case.
Actions taken by collections (which they are allowed to do) however are contrary of their previous communicated intentions which the taxpayer relied upon to their detriment.

Sure, there is a collection due process hearing (thanks to the Reform Act of 1998), but what happens when a taxpayers defaults on a negotiation they previously made in such a hearing? Should they lose all procedural due process rights for not being able to pay back a negotiated settlement?

Yes, there is even the Collection Appeal Program (CAP), but the standard of review is very favorable to the IRS.

So…is this what you want?

Yeah..you knew I was going to go here. But seriously. So this powerful agency — that, on its best day — earns a solid C+ when it comes to seizing property, is this the agency you want in charge of deciding what you need for healthcare?