Facing an IRS property seizure can be an overwhelming experience, but understanding the process and your legal rights can help you navigate this challenging situation effectively. When the Internal Revenue Service seizes real estate or other assets, it will sell the property and apply the proceeds (after deducting sales costs) toward your outstanding tax debt.
The Seizure Process
The IRS begins by calculating a minimum bid price and notifying you of this amount before the sale. You maintain the right to dispute the property's market valuation during this stage.
To announce upcoming auctions, the IRS publishes notices in local newspapers and posts announcements in public spaces. Following this notification, the agency typically waits at least 10 days before proceeding with the sale. Auction proceeds are allocated first to cover seizure and sales expenses, with remaining funds applied to your tax obligations. Should surplus funds remain after debt settlement, the IRS will inform you about the refund application process.
Challenging a Seizure
To potentially reverse a seizure, immediate contact with the IRS is crucial to address your tax liabilities and request property release. The agency may also voluntarily release seized assets if the action creates demonstrable economic hardship. If your request is denied, you retain appeal rights both before and after property seizure.
Following the sale's completion, you may petition for surplus funds return. For seizures occurring after March 23, 2017, such requests must be submitted within two years of the seizure date. For instance, a March 28, 2017 seizure would require filing by March 27, 2019.
Should the IRS deny your property return request, you may appeal this decision. Detailed information about appeal rights appears in Publication 1660: Collection Appeal Rights.
Mandatory Release Circumstances
The IRS must release seized property under specific conditions:
- Full payment of owed taxes
- Expiration of collection statute before seizure
- Demonstration that release would facilitate tax payment
- Existing installment agreement that prohibits continued seizure
- Verification of economic hardship preventing basic living needs
- Property value exceeding debt amount without compromising collection capability
It's important to note that property release doesn't eliminate tax obligations. Taxpayers must establish payment arrangements with the IRS, as failure to do so may result in renewed seizure actions.