If you owe the IRS back taxes and have not paid, they will start collection actions to resolve your tax debt. These actions include putting a tax lien on your real or personal property. A lien will prevent you from transferring your assets or using them as collateral to seek a loan without IRS approval until you settle your back taxes.
When a lien proves to be ineffective, however, the IRS may seize the property instead and sell it at auction to pay off your tax debt.
When Does the IRS Seize Personal Property for Auction?
The following are some instances when the IRS seizes property to auction:
- You owe the IRS a significant amount of unpaid back taxes over a long period of time.
- You ignored IRS balance due notices and requests to make payment arrangements.
- You did not pay off back taxes even after a tax lien on your property.
- You missed the opportunity to appeal an IRS decision, or you appealed and lost.
What Types of Property Will the IRS Auction?
The IRS will auction property such as:
- Real estate: Residential and commercial properties, rental property, land
- Vehicles: Cars, trucks, motorcycles, boats, airplanes
- Personal property: Jewelry, artwork, antiques, collectibles
- Business assets: Machinery, equipment, inventory
- Stocks and other investments
Can the IRS Auction Property If It Is Garnishing Wages or Levying Bank Accounts?
Yes. In some cases, the IRS will auction property even if it is already garnishing wages or levying accounts. For example, the IRS may still auction property if the amount collected from wage garnishment or a bank levy does not cover the full tax debt. In this case, the agency may take and sell assets at auction to settle the remaining tax balance due.
How Do You Stop an IRS Auction?
The actions you take following a property seizure can help stop the IRS auction. For example, if you pay your tax debt in full or agree to an IRS payment plan, they will remove your property from auction.
Here are some of the conditions you must meet before the IRS agrees to stop an auction:
- You have paid your back taxes in full or have proven that having your property helps you repay your tax debt.
- You have an IRS installment agreement or other tax debt repayment plan.
- You have shown that if the IRS auctions your property, it will trigger a financial hardship that prevents you from meeting basic needs.
- The value of the property the IRS wants to auction is worth much more than the back taxes you owe.
Can You Reclaim Your Property If It’s Sold at an IRS Auction?
In some cases, you can get your property back even after an IRS auction. The following are a few tips:
- Reclaim the property: If the IRS agrees, you can reclaim auction property from the winner within a 180-day redemption period. In this case, you will pay the new owner what they bid plus interest.
- Set aside the sale: If you cannot reclaim your property, consider setting aside or invalidating the sale. You’ll have to prove the IRS lien or auction process was not fair, that you paid your back taxes, or that you did not owe any tax.
In a nutshell, you still have a chance to own your property after an IRS auction. If you pay the new owner what they paid plus interest within a redemption period, you may reclaim your property. Again, this can only happen if the IRS says you can reclaim.
IRS auctions can be scary and overwhelming when your property is sold to someone else because you owe back taxes. Need more help? You can start online by answering 6 simple questions. You can also call us at 866-568-4593.
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