An IRS auction is an auction that takes place when the Internal Revenue Service Notice of Intent to Levy (IRS) sells items that it has confiscated. This may also be referred to as the IRS collection process, or repossession.
This typically occurs when an individual failed to file tax returns or engaged in other tax-related violations. An IRS auction sometimes allows the public to obtain various items.
The items that may be sold vary depending on the state as well as the venue of the auction. IRS auctions may also be called tax auctions.
Tax auctions occur when taxpayers fail to pay their state or federal taxes. This results in the IRS placing a lien on the taxpayer’s property and seizing it.
What Types of Items Are Sold at IRS Auctions?
There are numerous different types of items that are sold at IRS auctions, including, but not limited to:
Essentially, any type of asset an individual owns may become subject to a tax lien if the individual does not pay taxes. A lien allows the government to assert its interest in the individual’s property and obtain title to it.
One type of commonly repossessed item is a car or other types of transportation vehicles.
What Is the IRS Collection Process?
The IRS can begin the collection process to ensure that an individual’s tax debt is paid if they have been found guilty of tax evasion or tax avoidance. When an individual files their taxes but does not pay them in full, the process also begins.
The IRS will issue a bill to the individual when they fail to pay the taxes that they owe. The collection process will then begin.
In addition, the IRS will mail the individual a Publication 594 and a Publication of Taxpayer Rights along with their bill. The options and rights that the taxpayer has when dealing with the IRS will be outlined in these documents.
How Can I Tell Whether the IRS Has Begun to Collect?
The IRS will initially send an individual a bill informing them that they have an unpaid tax debt as well as detail the reasons why. Any additional fines or interest that accrued after the due date of the taxes will also be included in the statement.
An individual can pay this invoice in full using a credit card, a check, or a money order that is payable to the United States Treasury.
What Will Occur if I Am Unable to Pay in Full?
If an individual does not pay the entire amount, daily compounding interest will be charged on their remaining balance. In addition, a monthly late payment fee will also be assessed.
Because of this, an individual should make an effort to pay as much of their debt as they are able. In order to help an individual pay their entire tax debt, it may be helpful to obtain a bank loan or a cash advance on a credit card.
The interest rate that is charged by the bank or credit card may be less than what the IRS charges. It may also prevent an individual’s credit score from being ruined by their tax debt.
An individual may be able to work out a monthly installment payment plan with the IRS if they cannot pay their tax debt in full up front or obtain a loan to cover it. An individual may also be able to work out a deal with the IRS for an offer in compromise.
Can the IRS Seize My Belongings?
Yes, the IRS can place a tax lien on an individual’s property in order to collect on their tax debt. In addition, the IRS may legally seize and sell an individual’s property to pay off their tax debt by serving their employer with a Notice of Levy.
In the context of an IRS seizure, an individual’s property may include their:
- Bank accounts;
- Social Security benefits;
- Real estate;
- Boats; and
- Other property.
Statute of Limitations for IRS Collections
When an individual owes back taxes to the IRS, the IRS may only go after them for a specific amount of time. If the IRS does not act within ten years, or the statute of limitations, the individual’s debt will be wiped out.
After this time period, the IRS cannot lawfully collect the back taxes from the individual. This means that the IRS loses the opportunity to collect back taxes from thousands of delinquent taxpayers each year.
When Does the Statute of Limitations Begin and End?
The statute of limitations begins when the IRS sends an individual a notice that the individual owes them money. It begins on the date that is on the notice and will end ten years from that date.
Even if an individual attempts to hide from the IRS by not filing their taxes for ten years, it does not mean the statute of limitations has ended. Hiding from the IRS will not help an individual dodge their tax penalties.
Can I Contest an IRS Repossession?
Typically, an individual has 30 days to respond to notices that are sent from the IRS. During that time, an individual may respond in various different ways that would help to prevent a tax lien from being placed on their property.
For example, an individual may respond with actions including:
- Installation payment agreements, or paying back an individual’s debt in portions over time;
- Offer in compromise, or agreeing to pay back only a portion of the debt;
- It is important to note that this is not available in all cases; and
- Claiming reasons for non-payment, such as:
- undue hardship;
- unavoidable absence;
- military service; or
- other reasons for the non-payment.
There are also other responses an individual can provide in order to prevent their property from being sold at an IRS auction. An individual may need to hire a lawyer for assistance with their legal claim.
What Is Redemption of Property?
Prior to an IRS auction or the sale of property, any individual whose property has been levied upon have the right to pay the amount that is due, along with the expenses, to the Secretary at any time before the property is sold. If the property is real property, the owner of that property may redeem it even after it is sold at any time within 180 days.
How Should I Respond to the IRS’s Action?
If an individual receives a Notice of Intent to Levy, they should respond within 30 days of receiving this notice. When the individual is responding to the notice of intent to levy, they should respond by providing:
- A complete history of the incident;
- A complete tax payment history of the debtor;
- Why compliance with tax code was not met;
- Witnesses, documentation or any other evidence which could prove the circumstances the individual describes; and
- Their exact reason for failure to comply.
Do I Need a Lawyer for Help with IRS Auction Issues?
If you are handling an issue that involves the IRS, it may be overwhelming because of the many laws that are involved in the process. It is in your best interests to consult with a tax lawyer for assistance with the IRS collection process.
Your lawyer can advise you how to proceed as well as help you throughout the legal process. In addition, if a lawsuit is filed, your lawyer will represent you during any court hearings.