One of the most humiliating experiences in life is standing by helpless, watching a large number of IRS employees pull up to your home with a truck to execute a seizure of your personal property. Fortunately, traumatic incidents of this kind are now few and far between but still occur. A Report by the Treasury Inspector General For Tax Administration, released on May 6, 2011, indicates that there were 578 seizures conducted by IRS from July 1, 2009 through June 30, 2010. For the same period in fiscal year 1997, IRS conducted 10,090 seizures. The report states it is unlikely seizures will ever return to the 1997 level.
Levies and seizures are executed only after:
- IRS has assessed tax
- IRS sends a Notice and Demand for payment.
- The tax is not paid.
- IRS sends a Final Notice of Intent to Levy and Notice of Right to a Hearing (CP-523).
- Thirty days elapse following the Notice of Intent to Levy without the tax being paid or the taxpayer requesting some kind of review, alternative collection measure or re-consideration.
Most common are levies on bank accounts and wages because those levies are very easy for IRS to execute. IRS frequently has bank account numbers from taxpayers having requested direct deposit of a refund or having paid tax with a check. IRS has Forms W-2 with employer’s addresses. Levies on wages and bank accounts result in cash flowing directly into the Treasury fisc.
Seizures of personal property from a residence are a horse of another color. IRS must either obtain owner consent to enter the home or obtain a Writ of Entry from a U.S. District Court Judge or Magistrate. There are costs associated with seizing, maintaining and selling personal property seized. Moreover, in today’s commoditized e-bay market, personal property of the average sort owned by middle-class taxpayers is almost worthless. Today, even charities are becoming particular about what kind of personal property they will come to pick up from a home. The market is flooded with used merchandise and IRS does not want to get stuck with stuff the cost of seizing will exceed the seizure related expense. Thus, seizures today are less frequent and usually involve celebrities, the very rick or drug dealers who own many toys like cars, expensive jewelry and art.
One of the most famous and sad stories of an IRS celebrity encounter involved Bud Abbott of the famed “Abbott and Costello” comedy team. At age 64, Bud wound up owing a large sum to IRS after intensive audits, as Abbott himself put, “They disallowed this and disallowed that” including his chauffeur used because he had never driven a car. Eventually, to pay the taxes assessed, IRS took virtually all of his assets including the rights to the many films he’d made with Lou Costello. Bud Abbott ended up broke. He was quoted as saying, “Once they get their hooks into you, you’re a dead pigeon.” (from Screen Stories, 1960).
It is entirely inappropriate, however, for IRS to use the threat of seizure of personal property having little value to extort payment agreement from a taxpayer or to seize such property to force the taxpayer to buy it back. The seizure often causes hardship because personal property worth little to IRS has sentimental value and may be expensive to replace, if suitable used items cannot be quickly located.