IRS rakes in $114 million from sale of seized taxpayer assets

TND Guest Contributor: M.D. Kittle, WatchDog.org

If there’s anything you take away from this story, make sure it is this: The Internal Revenue Service from 2011 through 2014 took in about $114 million in proceeds from the sale of seized taxpayer assets.

And one more thing: Among the many great ironies of the IRS is a position known as Property Appraisal and Liquidation Specialist and that the tax collector refers to this position by the acronym, PALS.

PALS was set up to ensure taxpayers’ rights are protected when the government seizes property for unpaid taxes.

But those rights are not always protected. Hence the need for an audit by the IRS’ auditor, the Treasury Inspector General for Tax Administration, or, for short, TIGTA — an acronym that doesn’t spell anything friendly or snappy.

The audit found that asset seizure cases, at least the ones sampled in the review, were “properly inventoried, safeguarded, and handled professionally.”

Written sale plans developed by the liquidation specialist, however, “provided varying amounts of detail for the actions to be performed on the day of the sale.”

“More consistent and specific sale plans could improve managerial oversight and ensure consistent treatment of seized assets,” the auditor writes of PALS.

Personal items found in seized assets were not always properly recorded upon their return to taxpayers, according to TIGTA.

There also is a glaring policy omission that could pose security concerns.

“Additionally, there is no requirement for removing taxpayer information (such as GPS) from installed systems in vehicles,” the audit states. “Such information could present a security risk if a third-party purchaser gained access to it.”

The IRS generally first notifies taxpayers of the collection of unpaid taxes through a letter, followed by telephone calls, and then personal contacts from a revenue officer.

Agents are supposed to weigh the taxpayer’s ability to pay a delinquent tax bill and to discuss the availability of alternative payment methods, such as installment agreements or a settlement.

“Prior to levying or seizing a taxpayer’s property, the IRS must provide notice to the taxpayer and an opportunity for the taxpayer to request a Collection Due Process hearing,” TIGTA notes in the audit. “If these actions have been taken and the taxpayer has not fully paid the tax due, the revenue officer has the authority to take the taxpayer’s funds or property to pay the tax.”

Such seizures and their accompanying auctions brought in north of $22 million for the IRS in fiscal year 2014, according to the audit. That’s down from nearly $31 million the previous year. The proceeds are supposed to be applied to taxpayers’ outstanding tax liabilities.

Two years ago, a TIGTA audit found 30 percent of IRS seizures of taxpayer property had not complied with law. The most recent audit did not note that information.

RELATED: Majority of tax law violators at IRS don’t get fired, report finds

Up until Congress enacted the IRS Restructuring Reform Act of 1998, revenue officers had been allowed to participate in the sales of seized assets. Suffice to say, the IRS received a lot of taxpayer complaints the agency was overly aggressive in enforcing the tax law.

The IRS’ PALS was brought in to oversee the sale of seized property.

In its recent review, the auditor attended six IRS auctions and reviewed a sample of 44 seizure cases. The TIGTA audit found the IRS agents worked efficiently in selling off seized items.

“At one sale we attended, numerous items were being auctioned and sold. To make the process more efficient, the PALS used a local database program that allowed them to log in the bidders and the property being sold,” the audit states. “Once the auction was completed, the program made it possible to efficiently generate certificates of sale to the appropriate bidders that listed the specific items they purchased during the sale.”

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M.D. Kittle is national First Amendment reporter at Watchdog.org. Contact him at [email protected].

Watchdog.org is an online news organization that publishes articles by independent journalists covering state-specific and local government activity. The program began in September 2009, a project of Franklin Center for Government & Public Integrity, a 501(c)3 non-profit organization dedicated to promoting new media journalism.  This article is reprinted with permission.

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