What Taxpayers Should Know About IRS Property Seizure

The start of the year is almost here, and with that comes a shifted mindset toward new beginnings. New year, fresh start. But, that doesn’t mean wiping the slate on everything in 2023, and that includes any tax debt you’ve piled up and haven’t dealt with.

So if you really want to start off on the right foot in 2024, you have to face that debt. Here’s why: If you keep ignoring it, eventually, the IRS will take it upon themselves to seize your property. They’ll start with wage garnishment, but if your debts are large enough and undealt with, it’ll lead to them seizing your home and any other physical assets that can be sold to pay off the debt.

How that happens has typically been a bit of an outdated system. So, back in October, they proposed some changes to modernizing the process — both to simplify the process as well as to maximize the amount retained from the sale. Believe it or not, the IRS does conduct some of their doings with your best interests in mind.

But how do you get to the point of property seizure with the IRS?

Well, every relationship thrives on communication, and the one with the IRS is no exception. When you ignore their snail mail messages about your tax debt, the IRS takes more extreme measures to get you to pay attention.

Now the simplest answer here is talk to them. Pick up the phone, have a chat, and you might just avoid the property seizure last resort.

But if you don’t, the IRS, being the serious agency it is, will escalate things by issuing a final notice of intent to levy (your property and/or assets). After that, you get 30 days to respond. If you don’t, that means they’ll resort to property seizure and sale. Tangible goods like cars and homes are a bit trickier for the IRS to seize – they need a court order and internal cooperation, and it’s a last resort after exhausting other options.

In the rare event that your property does get seized, the IRS crunches numbers to set a minimum bid price. But here’s the deal – it’s not set in stone. The IRS shares the calculation with you and invites you to challenge the fair market value determination.

At this point in the process, you’ll receive a notice of sale and the pending sale announcement goes public. They announce the impending sale in Coastal Southeastern NC newspapers or flyers in public places.

After the public announcement, the IRS usually waits at least 10 days before starting the official auction of your goods. The money from the sale covers the costs of seizing and selling your belongings, and then goes toward your tax debt.

If there’s money left after settling your tax debt, the IRS will let you know how to get a refund.

Modernizing the property seizure process

Now, let’s go back to those proposed changes to the sale of seized property I mentioned earlier. With the cash infusion from the American Rescue Plan, the IRS has been allocating part of those funds to modernizing their systems. That includes the property seizure/sale process as well.

Instead of relying on newspaper listings to advertise the sale, they’re now looking at embracing online advertisements. The idea is to shift from the traditional local stage to a virtual one, making the sale more accessible and efficient.

This move also aligns with the IRS’s goal of conserving resources while increasing the chances of obtaining higher bids.

The proposed changes also focus on flexibility. The IRS aims to choose the method of grouping or selling items that would likely produce the highest overall sale amount and be the most feasible. This would also mean removing the existing $200 or 20 percent requirements for initial payments and specifying the initial payment amount in the public notice of sale, or the instructions referenced in the notice, when full payment is not required when the bid is accepted.

So, what does all this mean for taxpayers facing the possibility of property seizure?

It means a process that’s both in your and the IRS’s best interests. Broadening the potential audience by taking things digital can mean more money from the sale and less cost to perform it.

Moreover, the proposed flexibility in grouping and selling methods, along with relaxed payment terms, offers a more tailored approach to the unique circumstances of each taxpayer. It’s a departure from the one-size-fits-all model, providing more options for both the IRS and the taxpayer.

If you find yourself treading the waters of back taxes and looming property seizure, don’t wait until the eleventh hour to deal with it. Instead, start 2024 fresh by talking about your tax debt and exploring repayment options. I’m here to help you do that.