IRS Breaks Law in 22% of Seizures?

On Monday, July 16, 2012, The Treasury Inspector General for Tax Administration (TIGTA) released Fiscal Year 2012 Review of Compliance with Legal Guidelines When Conducting Seizures of Taxpayers' Property (2012-30-072):

The TIGTA report presents the results of their review to determine whether Internal Revenue Service (IRS) seizures complied with legal provisions set forth in Internal Revenue Code (IRC) Sections (§§) 6330 through 6344 and with the IRS's own internal procedures. TIGTA is required under IRC § 7803(d)(1)(A)(iv) to evaluate the IRS's compliance with the legal seizure provisions to ensure that taxpayers' rights were not violated while seizures were being conducted. Since 1999, TIGTA has evaluated the IRS's compliance with the seizure provisions. This audit was not intended to determine whether the IRS's decision to seize was appropriate nor does it identify the cause of any IRS violations.

Following passage of the IRS Restructuring and Reform Act of 1998, IRS seizures decreased from 10,090 in FY 1997 to 74 in FY 2000. The number of seizures has increased since FY 2000; however, seizures in FY 2011 were still 8 percent of those reported for FY 1997. Although seizures made during FY 2011 were 28 percent higher than those made during FY 2010, it is unlikely that they will ever return to pre-1998 levels.

For this report, TIGTA reviewed a random sample of 50 of the 747 seizures conducted from July 1, 2010, through June 30, 2011, in order to determine whether the IRS is complying with legal and internal guidelines when conducting each seizure. In 78% of the seizures audited, the IRS followed all guidelines. In 11 seizures, however, TIGTA identified 14 instances in which the IRS did not comply with a particular IRC requirement. Specifically, TIGTA found:

· The sale of the seized property was not properly advertised. (IRC § 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. (IRC § 6335(a))

· Proceeds resulting from the seizure were not properly applied to the taxpayer's account. (IRC § 6342(a))

· Information relating to the sale of the seized property was either incorrect or not provided to the taxpayer. (IRC § 6340(c))

While 22% is an improvement from the 2009 TIGTA report in which nearly 46% of all seizures failed to comply with legal and internal guidelines, the IRS still falls short of the mark.

To read the TIGTA report in its entirety, click here.

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