The IRS doesn’t always act in its own self-interest
I don't write a lot of blog articles about particular cases. Generally I stick to more generic explanations and fact patterns. Today I can't help myself. Here is a short background on this particular taxpayer's case.
Mr. Taxpayer is a shareholder of a rather large company that had a payroll tax problem. He is over 70 years of age and is trying to wind down his work and responsibilities etc. Due to a downturn in business and an embezzlement by a trust employee, the IRS assessed the Trust Fund Recovery Penalty against he and his partner. The total liability for the Trust Fund Recover Penalty was in the neighborhood of $200,000.00. When the Automated Collection System (ACS) issued a Final Notice of Intent to Levy, we filed a Request for a Collection Due Process (CDP) knowing that it would likely be easier to deal with IRS Appeals rather than ACS. ACS has a reputation for being difficult to deal with. I believe that they are difficult to deal with and the reason is that they are not entrusted with very much authority whatsoever. Their authority extends to those acts which are detrimental to the taxpayer not those acts that might be considered helpful to a taxpayer. Even when they know the law is not on their side, they stonewall and rarely act in a manner consistent with the law. But I digress….
Back to our story. Mr. Taxpayer agrees to a monthly installment agreement in the amount of $3150.00 and pays it for 11 months. IRS levies his bank account (in my opinion contrary to the law.) Initially when we called to request a release of the IRS bank levy (a very rare concept, they almost never agree to release money they have already seized) they agree to the release and request copies of the checks paid against the installment agreement. Fast forward…..10 days goes by and no bank levy release? What's up with that? I call them back and I'm told the manager didn't approve the release. You see it turns out that Mr. Taxpayer made two payments (over six months ago) about a week late. So…the IRS seized the $9000 he had in the bank and defaulted his installment agreement. Now they want to go over his financials again. A process that is guaranteed to take over six months. All the while he won't be making his $3150.00 payments. So it will turn out to be a net loss for the IRS. It just goes to show you that the IRS routinely bites its nose off to spite its face.
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Comments on The IRS doesn’t always act in its own self-interest
Dear Mr. Mish,
After exploring your fascinating blog, I have some questions. There might be one case where the IRS really does not act in its own ultimate self-interest.
As a longtime animal lover, I must ask: When it comes to IRS levies and/or property seizures, can the IRS actually seize household pets for back taxes and/or penalties, interest, etc.? Or are pets considered either "livestock" or "personal effects" exempt from levy and seizure?
If pets aren't exempt under the law, what have the IRS's _actual practices_ been with regard to taxpayers' pets? I am not talking about exotic or expensive animals here, just "ordinary" pets. In actual practice, do taxpayers subject to levy and/or seizure actually lose their pets?
What if a taxpayer, fearing s/he might not be able to care for a pet, gives (or sells) the pet to someone s/he trusts who can? Will the IRS actually seek to take such a pet away from a new pet guardian? Must there be an "arm's length" sale and/or a sale at "fair market value" to protect the pet from seizure by strangers and disposal to an unknown fate?
What about cases where a taxpayer has died and has willed the pet to someone else? Can or does the IRS actually seize the pet in such a case?
If any innocent pets are thus seized, it's truly outrageous. Congress should then exempt taxpayers' household pets, maybe up to certain monetary value, from this. What do you think?
Dear fourlegsandatail,
I'm not sure if your comment was made "tongue in cheek" in or not but I'll play along. We don't like to think of them as such but pets are considered personal property and would therefore fall under the personal effects category. A common dog or cat is virtually valueless (monetarily speaking of course) so it is very unlikely that the IRS would ever seize a pet. This is because the IRS is prohibited from making what is known as a punitive seizure. They can't seize property unless the proceeds from that seizure will actually produce revenue to offset the liability.
If you are genuinely worried about your pet being seized, you can sleep easy. It's not going to happen. I have never even heard such a thing mentioned. If you are merely having fun posting the comment, that's ok too. I thought your post was entertaining and certainly inspired some thought on my part.
Dear Mr. Mish,
Thanks for your clear explanation. No matter where any of us might stand with our taxes, those of us who care about pets (and we all should) should find your answer good to know.
No, I am not worried about any pet(s) of mine being seized.
However, I have been wondering about what might happen if someone inherits a pet from a friend who has died (the deceased so provided in his will), but the deceased owed considerable taxes to the IRS. I wondered if the IRS could or *would* actually seize the pet from the new two-legged guardian and sell the animal toward the taxes (and/or possible penalties or interest) owed by the deceased, leaving the innocent creature to an uncertain–and unsettling–fate.