TIGTA Reviews IRS Seizure Compliance

Los Angeles, CA - Sometimes, you just don't know whether to be disturbed or amused. TIGTA (the Treasury Inspector General for Tax Administration) just issed a press release about a recent audit project. The title isFiscal Year 2009 Review of Compliance With Legal Guidelines When Conducting Seizures of Taxpayers’ Property

Part of what they say in the press release is:

    Our review of a random sample of 50 of the 610 seizures conducted from July 1, 2007, through June 30, 2008, determined that the IRS complied with the numerous legal and internal guidelines when conducting the majority of seizures. However, in 23 seizures, there were 26 instances in which the IRS did not comply with a particular Internal Revenue Code requirement. (italics are mine)

In 23 seizures out 50, there were errors. That's nearly half the seizures - 46%.

Let's face it, when we deal with numbers, statitics tend to have more transparency to us. Like when they say there is a 100% increase in women in top CEO positions. That means what? Last year there was one. This year there are two? Or sales increased 50% this year. Sure, last year, sales were only $5,000 - now they're up to $7,500. Big deal. Compared to sales only increased 1.5%. But in a company where sales are typically $50 million, a 1.5% increase in sales means $750,000. Remember to look at the reality behind the numbers.

In this case, TIGTA is telling us that when it sampled nearly 9% of all cases, IRS made errors in the process of seizing taxpayer assets about 46% of the time.

The report tells us that because of myriad number of steps and procedures involved in each seizure, the overall error rate was only 1.5%. When you look at it like that, it doesn't seem like much.

This is an OPPORTUNITY

From the perspective of a taxpayer representative, you may want to look closely at your clients' seizures to see if you can void it and get the assets back because of technicality where IRS erred. With that kind of an error rate, you're bound to find something to use in your client's favor.

Incidentally, an interesting and disturbing point was brought out in the press release.

    Money realized from the seizure of property is required to be applied first to expenses of the seizure and sale, second against any unpaid tax imposed by IRS law against the property seized, and finally against the liability for which the seizure was made.

Let's face it, if IRS seizes and asset and sells it, the sale of that asset will result in a taxable event. Heck, sometimes, the seizure of an asset will too, when the asset is a retirement account of any sort.

So the first proceeds from the sale go to cover administrative expenses. The next part of the money is set aside, in effect as estimated taxes to cover the current year's taxes on the seizure and sale. What's left over is applied to the outstanding balance that already existed.

Sometimes, that's not a lot.

That brings to mind a case someone brought me about 25 yeas ago, when the world of collections representation was dim and hazy and completely opaque.

This fellow (some sense of mafia-type ties...) was referred to me. He had done some jail time for tax evasion and was just out on probation. He was a musician with some major hits to his credit. He owed IRS about $2 million at the time. IRS had seized one of his gold record masters and auctioned it off, generating about $200,000 for it. This man was extremely angry because if his people had sold it properly, they could have generated millions from that record. He wanted me to fight IRS and force them to credit him for the real value of the asset they had seized.

Frankly, even if he had not totally creeped me out, back then I would not have had a clue on how to proceed. I wouldn't have known the first step to take. (And with fellows like this, you certainly got the feeling that you did not want to fail!)

Today, we'd have had some recourse at the time IRS seized the assets. Heck, with all the series of notices IRS sends out, there would have been plenty of time to take care of things and to sell something off before a seizure had become necessary.

Back in the late 1970's, early 1980's the only folks who really knew how to handle collections cases like this were former IRS Revenue Officers (collections officers) or very expensive law firms who specialized in these areas.

These days, there are all kinds of places to learn how to deal with collections. Heck, even IRS offers free information and tools.

You can attend the National Tax Practice Institute (NTPI), which is the National Association of Enrolled Agents' annual series of courses for those who want to learn representation. This year, the courses will be on August 9-12 at the Sheraton Baltimore City Center Hotel, Baltimore, MD. Once you complete all the levels of training, it's almost like getting a Masters in Taxpayer Representation.

Other organizations offer courses, but not entire programs. Check with your professional society to see what they offer.

Considering IRS is hiring and training thousands of new agents to perform audits (about 5,000) and to handle the resuling collections load, don't you think it's time to brush up your represenation skills?

This blog

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

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