So you have the IRS on your back and don’t have the money to pay, what might happen? The TV ads suggest that a company can fix the problem. Of course you have to consider how you found yourself in the situation to begin with.
But what happens next? As this at the very core of retired IRS Tax Collector Wayne Vinson’s recent book Tax Collectors And Other Sinners, I reached out and asked him.
One of the strongest actions IRS can take to collect delinquent taxes, is to seize and sell a taxpayer’s asset(s). The most common kind of IRS seizure is a seizure of personal property—a car, equipment, antiques, anything but land, which is real property. Two or more revenue officers go to the location of the assets and take possession of them. The revenue officers have the necessary paperwork authorizing the seizure.
The revenue officers prepare an inventory of the seized property, on a notice of seizure, and give the taxpayer a copy of it. If the property is to be moved the revenue officers will have made arrangements for transporting and storing the asset(s). If the property will not be moved, the revenue officers will probably secure it by putting IRS locks on the doors.
A date of sale will be established. A notice of sale, giving the date, time, and location of the sale, will be published in an area newspaper, not less than 10 days before the sale.
Before the sale, the taxpayer can pay off the tax or make an acceptable agreement, and the property will be released back to the taxpayer. Otherwise, the property will be sold on the sale date, and the proceeds applied to the tax liability.
Here is what can happen if the taxpayer pays the tax after the notice of sale has been published. The taxpayer has his property back, but potential bidders don’t know that. They will appear on the published date of sale to bid. A revenue officer is required to be at the published location, to announce that the sale is off: the taxpayer has paid the tax and redeemed his property in accordance with the law.
I had seized a 1955 Chevrolet, a hot running car. It was 6 or 7 years old and in excellent condition. After the notice of sale was published the taxpayer came in, paid the tax, and got his Chevy back. On the published date of sale, I was there and told some very eager prospective bidders that the sale was off—told them why. They were understandably disappointed and one guy was really mad. He said he had taken time off his job and who was gonna pay him the lost wages. I apologized for the inconvenience and the crowd melted away.
That is the basic procedure for a seizure of personal property. Here are more of the details.
Why two revenue officers, or more? At least two ROs are required, so there can be a witness to the actions taken by the RO and by the taxpayer. A big seizure may require more ROs to help with the inventory, help with securing the place, etc.
Before the sale a minimum bid must be established, to protect the taxpayer’s equity in the property. Say the seized property is a 2010 Ford pickup truck in excellent condition, low mileage. Everyone knows the forced sale value of the truck is at least $7,000. For IRS to sell it for, say, $3,000, would be an injustice to the taxpayer. That is the reason for the minimum bid. If memory serves, at the sale if the bidding does not reach the minimum bid, IRS bids in the property. The taxpayer gets credit on his tax account for the amount of the minimum bid. IRS then sells the property for whatever it can get.
The human element. A seizure of property can be an emotional experience for a taxpayer, or for relatives or employees of the taxpayer. If the seizure is of a going business, the taxpayer may have put his life’s blood into it—and now it has failed. Revenue officers would seize the business assets, send the employees home, and put locks on the doors.
The employees are almost certain to be on the taxpayer’s side, and against the IRS seizure. The taxpayer is losing his business and they are losing their jobs.
I once seized a small town restaurant, a homey place with three or four employees. We got there early, hoping to get it done before customers arrived, and save the taxpayer some humiliation. One of the waitresses got mad and had some choice things to say to me. The taxpayer led her away and calmed her down—an incident was avoided.
Anything can happen at a seizure.
Yup, I think Wayne hit the nail on the head. Having the IRS turn up at your door is unlikely to make your day. There are however more ways that your day can be ruined, more in Part 2.
Wayne Vinson was an IRS agent for 33 years and the author of a real thriller, Tax Collectors and Other Sinners, the story of a psycho killing tax collectors. It is available at amazon.com as an E-book or soft cover.