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IRS Pre-Seizure and Sale Considerations

5.10.1  Pre-Seizure Considerations  (10-01-2004)

  1. The decision to seize a taxpayer's assets is one of the most sensitive decisions that a revenue officer will make. The case history must be well documented with all actions that have been taken in order to show the justification for seizing a taxpayer's assets. The decision to seize must be based on the individual facts and circumstances of each case, and the revenue officer must follow all legal and procedural guidelines.

  2. In order to ensure that enforcement action is used as an appropriate case action, compliance employees should be familiar with the following policy statements (IRM 1.2.1, Policies of the Internal Revenue Service) related to seizure action:

    • P-5-1 Enforcement is a necessary component of a voluntary assessment system

    • P-5-28 Successive seizures Timing to avoid undue hardship

    • P-5-34 Collection to be enforced through seizure and sale of assets of a taxpayer only after thorough consideration of all factors and alternative collection methods

    • P-5-35 Establishment of a minimum price in distraint sales

    • P-5-38 Seizure of assets located on private premises


  3. The revenue officer will make the seizure and take all seizure actions up through inventorying and securing the property. The revenue officer and the PALS may work together to complete the inventory after the seizure has been conducted. As soon as possible after the inventory, custody of the property will be transferred to the Property Appraisal and Liquidation Specialist (PALS), who will be responsible for all further sale related actions. The revenue officer, however, will still be responsible for the final case resolution.

  4. Section 1203(b) of the Restructuring and Reform Act of 1998 provides for the mandatory termination of IRS employees under various instances of misconduct. Since several of the provisions can apply to the seizure and sale program, revenue officers and PALS should be aware of these provisions and should follow all procedures in this handbook without deviation. Inadvertent actions are not subject to the provisions of 1203(b).  (10-01-2004)
List of Prohibited Seizures

  1. The following types of seizures are prohibited:

    • Seizures that will result in no equity there must be sufficient net proceeds from the sale to provide funds to apply to the taxpayer's unpaid tax liabilities

    • Seizures when there is a pending installment agreement plus 30 days after rejection of the installment agreement and during pendency of appeal filed within that 30 day period

    • Seizures when an installment agreement is in effect or if terminated plus 30 days after termination and during pendency of any appeal filed within that 30 day period

    • Seizures when there is a pending offer in compromise plus 30 days after rejection and during pendency of appeal filed within that 30 day period

    • Seizures conducted on the day the taxpayer has to appear for a summons

    • Seizures for employment tax or employment tax-based trust fund recovery penalty assessments that are also the subject of refund suits by the person whose property is to be seized unless jeopardy exists or the taxpayer waives suspension of collection in writing

    • Seizures during which communications with the taxpayer are initiated outside of the hours of 8 A.M. to 9 P.M. unless there is knowledge that such communications would not be inconvenient to the taxpayer

    • Seizures when the taxpayer is in bankruptcy (BC Section 362)

    • Seizures which allow the taxpayer less then the exempt amounts to which they are entitled

    • Seizure of any real property used as a residence by the taxpayer, or any real property (other than real property that is rented) used by any other individual as a residence, if the liability is $5,000 or less  (10-01-2004)
Actions Required Prior to Seizure

  1. IRC 6331(j) outlines specific actions that must be completed before the seizure of a taxpayer's assets can be recommended:

    1. The liability must be verified.

    2. Alternative collection methods must be thoroughly considered.

    3. An analysis must be conducted to show that the expenses expected to be incurred with respect to the seizure do not exceed the fair market value of the asset to be seized.

    4. There must be a determination that the equity is sufficient to yield net proceeds from the sale to apply to the liability.  (10-01-2004)
Verifying the Liability

  1. In order to verify the liability, the revenue officer should confirm during taxpayer contact that the taxpayer understands the assessment. If the taxpayer does not understand the assessment, the revenue officer should explain the assessment and address any concerns the taxpayer has.

  2. If the taxpayer claims the assessment is incorrect or has additional information that could impact the balance due, the case should be thoroughly investigated and the issue resolved prior to proceeding with enforcement action. The case history should be documented to reflect any concerns raised by the taxpayer and the steps taken to address them. If the liability is the result of an SFR assessment, the revenue officer should allow the taxpayer 30 days to prepare corrected returns.

  3. Some of the actions that can be taken to verify the liability include reviewing:

    • NMF/MF transactions

    • Pending transactions

    • Copies of cancelled checks

    • Innocent spouse claims

    • Abatement requests

    • IDRS history items


  4. If the issues raised by the taxpayer have been addressed under some other administrative or judicial proceeding (e.g., Collection Appeals Program (CAP), Taxpayer Advocate Services (TAS), audit reconsideration) prior to seizure action, further verification is not required and the taxpayer should be advised that the issue has previously been addressed. This should be documented in the history.

  5. If the taxpayer does not respond to the attempted contacts, the revenue officer should review IDRS and any prior correspondence from the taxpayer but is not required to take any further actions to verify the liability.  (10-01-2004)
Alternative Methods of Collection

  1. The service is required to consider alternative methods of collection prior to seizure. Alternative methods of collection include, but are not limited to:

    • Installment agreements

    • Offers in Compromise

    • Posting of bond by the taxpayer

    • Lien foreclosure

    • Levy

    • Assignments

    • Judgments

    • Specific follow up actions


  2. The determination to seize should be based on the facts of the particular case and the risk to the government of pursuing these alternatives. The possible alternatives should be discussed with the taxpayer. If the taxpayer requests an alternative that is not acceptable to the Service, the reason the request is not acceptable must be explained to the taxpayer. If the taxpayer has requested an installment agreement and that request is being rejected, see IRM 5.14 for the proper appeals procedures to follow. No enforcement action (except jeopardy action) may be taken while the taxpayer is undergoing an appeal.

  3. To assist in the consideration of alternative collection methods, a risk analysis must be conducted. If the alternative method of collection would put the government at greater risk of recovery of the liability, it may not be acceptable. The following issues should be considered as part of the risk analysis:

    • Past compliance history is there a history of non-compliance?

    • Current compliance is the taxpayer current and has the cause of past non-compliance been corrected?

    • Current financial condition can the taxpayer meet current obligations, including FTD's?

    • Future financial condition can financial adjustments help the taxpayer experience future profits?

    • Collection statute does the alternative provide for payment within the allowable statute?

    • Interest in Asset is the government's interest in the asset protected and will the taxpayer's interest in the asset increase?

    • Impact what impact will the seizure have on third parties or on non-compliant taxpayer groups?

    • Yield will an alternative collection method potentially yield more than the seizure and sale?


  4. The case history should be documented regarding the fact that alternative methods have been considered, why the alternatives were not acceptable, and the results of the risk analysis.  (10-01-2004)
Equity Determination

  1. To determine if there will be net proceeds available to apply to the liability, the revenue officer must complete an equity determination and prepare a draft minimum bid (IRM prior to recommending the case for seizure.


    There is no minimum amount that is required to be applied to the liability. In situations where there is a minimal amount of expected net proceeds, it is extremely important for the revenue officer and PALS to discuss the fair market value as well as logistical issues related to moving and storage of the property and the timing of the seizure so that expenses can be controlled in order to ensure that proceeds can be applied to the liability.


  2. The revenue officer must document how the fair market value of the asset was determined. The fair market value should reflect the condition of the property at the time the seizure is being considered. Information about the condition of the asset should be documented in the case history. If the taxpayer is uncooperative in providing information about the assets, the revenue officer will need to research many internal and external sources in order to determine an accurate value for the property. Some of the sources, in addition to information provided by the taxpayer, that can be used to determine the fair market value are:

    • Used vehicle guides

    • Assessment office

    • Property appraisals

    • Comparable sales

    • Financing statements

    • Tax returns

    • Contact with businesses or dealers that are familiar with the particular type of asset

    • Personal observation

    • Area realtors

    • Collection information statement

    • Daily stock quotations

    • Valuation Engineers

    • Property Appraisal and Liquidation Specialist (PALS)


  3. If the property under consideration for seizure consists of assets where an accurate fair market value (FMV) is not easily determinable or when moving and storage issues are involved, it is highly recommended that the revenue officer contact the PALS to discuss the valuation of the property or to request that the PALS provide an appraisal for the property and to discuss the logistical issues for the seizure. The PALS may wish to view the assets with the revenue officer before providing guidance as to the FMV, the estimated equity in the assets, and the estimated expenses. The PALS should be consulted to accurately determine the FMV and the expected net proceeds (IRM


    Any differences between the FMV on Form 2433, Notice of Seizure, prepared by the revenue officer, and the FMV on Form 4585, Minimum Bid Worksheet, prepared by the PALS, must be documented in the history. When possible, the PALS and the revenue officer should discuss and agree on the FMV prior to the seizure.


  4. In addition to determining the fair market value of the asset(s), a complete public records search must be conducted to verify ownership and to identify all recorded encumbrances against and interests in the property including, but not limited to:

    • Joint owners

    • Senior lienholders

    • Junior lienholders

    • Nominees

    • Transferees



    On July 1, 2001 revised Article 9 of the Uniform Commercial Code became effective in most states. When making an equity determination, the employee must be alert to complications arising with respect to a security interest perfected on or after this date. For multi-state corporations, filings with the locally designated recorder may not give a complete picture of competing claims. The state in which the business is located is the key.


  5. At local management option, commercial firms may be contracted to provide title search and encumbrance information reports. The delegation authority to approve the use of commercial title searches is contained in SB/SE delegation order 5.6. The cost of these reports may be charged to the balance due account as an expense and should be input as a TC 360. If public records cannot be checked prior to seizure because of a jeopardy situation, they will be checked at the earliest possible date after the seizure is made and documented in the history. The case history must be documented with the facts that led to the determination that a jeopardy situation existed. See IRM 5.11.3 for information on jeopardy situations.

  6. A Notice of Federal Tax Lien (NFTL) should be filed on all open periods prior to seizing property. This is not a statutory requirement; however, to maintain priority against other parties to whom the taxpayer might convey an interest in the property, it is the Service's policy to file the NFTL before property is seized.

  7. If the NFTL is mailed, ensure that it is recorded with the local registrar before proceeding with the seizure. Taxpayers must be notified in writing that the NFTL has been filed within five business days of such filing, and they are entitled to the Due Process Appeal provisions to ensure that the lien action is warranted. See IRM for the information on the Due Process appeal procedures that must be followed.

  8. The priority of the NFTL must be determined in relation to other creditors. See IRM and IRM 5.12.1 for information on the priority of the tax lien.

  9. If the taxpayer has a loan through the Small Business Administration (SBA), see IRM for the procedures to follow when enforcement action is being considered.

  10. The revenue officer should contact all senior and intervening lienholders in order to determine the balance remaining on each encumbrance. Letter 1029, or a similar letter, may be used for this purpose. The requirements for third party contacts should be followed for these types of requests.


    When calculating the expected net proceeds, make sure the relationship between the NFTL and any intervening lienholders is accurately analyzed to determine the expected net proceeds, particularly if the intervening liens are of significant value compared to the senior NFTL.


  11. For the Tenth Circuit states of Kansas, Oklahoma, Wyoming, Utah, Colorado, and New Mexico, pursuant to Neece v. I.R.S., 922 F.2d 573 (10th Cir. 1990), a summons must be used instead of Letter 1029 when any of the following situations exist:

    • The financial institution is located in the Tenth Circuit

    • The taxpayer resides in the Tenth Circuit

    • The Internal Revenue Service office is located in the Tenth Circuit


  12. Document on Form 2434B, Notice of Encumbrances Against or Interests in Property Offered for Sale (Exhibit 5.10.11), all encumbrances and interests of record, including federal tax liens. If no recorded interests other than the NFTL are found, Form 2434B will be documented to reflect this condition.


    The complete name and address of all encumbrances and interests of record must be shown on Form 2434B.


  13. The records check must be updated no more than 30 days prior to submitting the seizure for approval.  (10-01-2004)
Equity Determination Expenses of Sale

  1. After the fair market value and encumbrances have been verified and documented, the revenue officer should determine the estimated expenses of sale. Most seizures will require the expenditure of funds. The revenue officer and the PALS should coordinate to manage these costs in order to preserve the equity in the asset while still securing the maximum proceeds from the sale. Any travel related expenses of the revenue officer or the PALS should not be included as an expense of the seizure. Expenses that should be considered include, but are not limited to:

    • Towing fees

    • Storage costs

    • Transportation costs

    • Locksmith fees

    • Advertising costs

    • Auctioneer services

    • Appraisal fees

    • Other miscellaneous expenses


      Payments to senior encumbrances are not generally considered an expense of sale since the property is sold subject to the prior encumbrances.



  2. In most cases the PALS will have responsibility for custody of the property immediately after the seizure is made, and the expenses that occur after the initial seizure will be controlled by the PALS. Coordination with the PALS during the planning stage is extremely important and must be made in order to discuss the potential expenses that may be incurred. In some cases, the PALS may be more familiar with moving and storage facilities and may be able to secure a service for less than the revenue officer can on his/her own. In other cases, the revenue officer may be more familiar with local vendors and may be able to secure a lower cost for the service. The PALS will be aware of how long it will take before a sale can be scheduled, so timing of the seizure to reduce the number of storage days should be discussed. Custody of the property should be transferred to the PALS as soon as possible after the seizure so that expenses can be reduced, especially when storage costs are involved.

  3. During the planning stage, the revenue officer should anticipate any problems which may arise in connection with the storage and protection of property during the period of a seizure. Special actions requested to protect seized property will be noted in the case history.

  4. Movable property, in the public area of a business premise, can best be protected at another location. Whenever possible, government storage facilities in the area should be used; otherwise property should be stored in a warehouse operated by a responsible party. If storage, towing, transportation, or other similar charges are required, the revenue officer, with input provided by the PALS, should determine what the expected costs will be prior to the seizure. The PALS should determine whether to move the property themselves or if they should retain the services of a commercial shipper or mover based on the particular circumstances of the case:

    • Nature of the property value, location, size, weight, ease of transport

    • Amount of property involved

    • Cost of moving the property

    • Time and availability of the PALS and assisting employees


  5. The use of an armed escort (IRM or bonded courier should be considered if the property is of significant value, such as jewelry or gold/silver, and a commercial shipper is not being used to transport the property.


    Vehicles may not be driven to the storage location. Based on the type of assets involved, the PALS manager may be consulted regarding transportation and security of the seized assets. The PALS manager must approve the use of an armed escort or bonded courier, as well as the personal transportation of seized assets.


  6. Property, such as expensive jewelry, is best stored in an IRS office. It should be protected in accordance with the nature and value of the property, as described in IRM 1.16.15, Minimum Protection Standards. Normally, storing such items in a safe in a local office will afford it sufficient protection.

  7. When the property to be seized is located in rented premises and consists of machinery or other property not easily transported, or is comprised of a considerable quantity of business assets, arrangements should be made with the landlord for storage of the property on the premises. Unless the real estate housing the seized assets is also being seized, neither padlocking nor placing warning tags on the premises is appropriate. Arrangements should be made with the taxpayer or owner/landlord in order for the premises to be padlocked or the locks changed so that the Service has sole possession of the premises. Contact area counsel to determine who has the authority to authorize padlocking of the premises, particularly if the taxpayer is current on the rent. If arrangements cannot be made, include these costs in the estimated expenses and arrange for moving and storage of the assets.

  8. If the taxpayer has not made rent or lease payments in sufficient amount to cover the period through the proposed date of sale, a reasonable charge for storage should be arranged. This charge should be based only on the number of days of actual occupancy under the seizure. In certain situations, the Government may be required to pay rent due to the nature of state law and/or the terms of the taxpayer/landlord rental agreement. See IRM Technical Services should be consulted when there is doubt as to whether the Government is obligated to pay rent in such cases. IRM Exhibit 5.10.12 contains an example of a landlord agreement. A landlord agreement may be signed by the territory manager, area director, or manager of the PALS.

  9. Padlocking and changing locks is not applicable in the seizure of personal residences and rental real property where the tenant is not the taxpayer, as possession of the real property remains with the owner or tenant occupant until sale or redemption occurs.

  10. If there are indications that the taxpayer or third parties may resist the sale of seized property, additional security may be necessary to protect seized property from vandalism. If private security guards or local police services are needed to protect the seized property, the revenue officer should determine these costs as well.

  11. Generally, there is no authority for the United States to purchase insurance coverage for seized property during the period between the date it is seized and the date it passes to a purchaser or is returned to the taxpayer. However, if the circumstances are unique, insurance coverage may possibly be acquired. A request stating all of the pertinent information should be sent to the area director, who has the authority and responsibility for any subsequent purchase, when seizure is first contemplated. Insurance coverage is to be acquired only by an authorized contracting officer through the Facilities Management function.

  12. Prepare a draft minimum bid in order to determine if there will be net sale proceeds to apply to the liability. IRM contains the procedures for preparing a minimum bid. The draft minimum bid should be prepared based on the input received from the PALS for both the FMV and the estimated expenses of sale. If no net proceeds are expected based on the minimum bid calculation, the revenue officer cannot recommend the case for seizure.

  13. After approval of the seizure has been secured, follow the procedures in IRM in order to formally contract for all of these services.  (10-01-2004)
Expenses of Sale Disclosure Issues

  1. Disclosure issues can arise during the pre-seizure process, particularly when contacting vendors for services. Disclosure for investigative purposes is permissible under IRC 6103(k)(6) and 6103(n). These contacts would be still be subject to third party reporting requirements.

  2. IRC 6103(k)(6) allows the revenue officer to "disclose return information to the extent that disclosure is necessary to obtain information which is not otherwise reasonably available with respect to the correct determination of tax, liability for tax, or the amount to be collected... ." Examples of this type of disclosure include contacts with:

    • Real estate professionals to secure appraisal information

    • Third parties familiar with the value of specialized equipment


  3. IRC 6103(n) allows the revenue officer to "disclose return information.... to the extent necessary in connection with the. . .procurement of equipment, and the providing of services, for purposes of tax administration. " Examples of this type of disclosure include contacts with:

    • Vendors to determine availability and costs for locksmiths, towing, storage, etc.

    • Landlords to determine lease information, storage of assets  (10-01-2004)
Equity Determination Exempt Assets

  1. If seizure of an individual taxpayer's assets is being considered, revenue officers must be aware of the property that is exempt from levy. These exemptions do not apply to partnerships or corporations. Revenue officers must document the case history as to how the exempt property value was determined.

  2. The following exemptions, which will be indexed annually for inflation, apply to individual taxpayers for calendar year 2004:

    • Any wearing apparel and school books that are necessary for the taxpayer or members of his or her family

    • Fuel, provisions, furniture, personal effects in the taxpayer's household, arms for personal use, livestock, and poultry up to $7,040 in value

    • Books and tools necessary for the trade, business or profession of the taxpayer up to $3,520 in value



    Vehicles are not considered exempt property either as personal effects or as tools of the trade


  3. For seizures of the assets, including vehicles, of an individual taxpayer used in the trade or course of business the revenue officer must document that the taxpayer's other assets are insufficient to satisfy the amount due plus expenses. Other assets must also include the future income that may be derived from the commercial sale of fish or wildlife harvested under a state fish or wildlife permit. These types of seizures require approval by the area director.

  4. Undelivered mail is exempt from seizure.  (10-01-2004)
Equity Determination Documented Vessels

  1. In order to determine the equity in a documented vessel, an abstract may be required. An abstract provides:

    • The history of the vessel

    • Bills of sale

    • Information about mortgages, maritime liens, and assignments


  2. The abstract can be obtained through the United States Coast Guard by contacting the National Vessel Documentation Center (NVDC). Provide the NVDC with the official vessel number and as much information as possible about the vessel, e.g., the owner's name, hull number, and the name of the vessel.

  3. The letter must be accompanied by a $25 money order made out to the National Vessel Documentation Center. The expense should be debited to the taxpayer's account through the input of a TC 360. The abstract request should be sent to:

    National Vessel Documentation Center
    2039 Stonewall Jackson Drive
    Falling Waters, West Virginia 254199502.  (10-01-2004)
Equity Determination Computer Equipment

  1. When determining the equity for computer equipment that will be seized, revenue officers and PALS need to be aware of the procedures that must be followed to remove taxpayer data from the hard drive and the impact the removal may have on the fair market value of the equipment.

  2. Before selling computer equipment that contains taxpayer information, the contents of the hard drive, including the file allocation tables (FAT), must be removed. If the taxpayer has software that can be resold according to the software licensing agreement, it can be reloaded onto the computer prior to sale. Area counsel should be consulted in order to determine which software may be reloaded.

  3. Prior to the Service removing the FAT, the taxpayer will be given the opportunity to download all of the information from the hard drive. The procedures to be followed are contained in IRM

  4. In order to accurately determine the FMV of the computer equipment, the value of the computer must be determined based on the contents of the hard drive that will be available to the purchaser at the time of sale.  (10-01-2004)
"Will Pay" , "Can't Pay" , and "Won't Pay" Factors

  1. Seizures will not be conducted on assets of taxpayers who " will pay" or "can't pay" . These categories include taxpayers who:

    • Do not agree with the assessment and are working with the Service to properly adjust their account

    • Will full pay their liability within a reasonable time frame

    • Require a reasonable period of time to sell an asset or secure a loan

    • Qualify for and submit an offer in compromise

    • Have no ability to make payments and have no distrainable assets (currently not collectible)

    • Request and qualify for an installment agreement


  2. Seizure should be considered for taxpayers who "won't pay" . This category includes:

    • Taxpayers who have the ability to remain current and/or resolve their delinquent taxes through an alternative collection method but will not do so

    • Taxpayers who do not have the ability to remain current and/or resolve their liability, but who have assets in excess of exempt amounts that will yield net proceeds to apply to the liability and are unwilling or unable to borrow on or liquidate these assets

    • Taxpayers who are pyramiding liabilities

    • Taxpayers who use unsupported tax arguments and continue to resist the requirements to file and pay

    • Taxpayers who will not cooperate with the Service, e.g., taxpayers that evade contact, will not provide financial information, etc.

    • Taxpayers who will not comply with the results of the Service's financial analysis or will not enter into an installment agreement or OIC

    • Wage earners who have not paid their tax liability and will not adjust their withholding to prevent future delinquencies

    • Self-employed taxpayers who have not paid their tax liability and will not make estimated payments to prevent future delinquencies

    • Taxpayers who do not meet their commitments (without a valid reason) as set forth by an installment agreement, OIC, or extension of time to pay


  3. The decision to seize will not be automatic on any account. The taxpayer's current situation should be the determining factor in the seizure decision. During the life of a collection account, a taxpayer will sometimes move from one category to another and the decision to seize must be based on their financial situation and actions at the time the seizure decision is being made.

  4. Exhibits 5.10.13 and 5.10.14 contain scenarios that illustrate how case decisions can be made based on these factors.  (10-01-2004)
Pre-Seizure Taxpayer Notifications

  1. Letter 1058 (L1058), Notice of Intent to Levy and Notice of Your Right to a Hearing, or ACS LT 11 must have been provided to the taxpayer at least 30 days before the seizure for each tax period that will be identified on the Form 668B.


    The CP 504 issued when a case enters status 58 does not include the required due process notification.


  2. The following information must be included with the L1058:

    • Publication 594 (Understanding the Collection Process)

    • Publication 1660 (Collection Appeal Rights)

    • Form 12153 (Request for a Collection Due Process Hearing)

    • Copy of the letter

    • Envelope


  3. Taxpayers should receive only one pre-levy notice regarding their rights to a collection due process hearing for each tax assessment. If the required notice for a module has already been sent and additional tax is assessed, a new notice offering a due process hearing must be sent before the additional assessment may be included on Form 668B. See IRM for information on the timeliness of this notice.


    An additional notice offering a due process hearing only needs to be issued in instances where the tax involved is a different type of tax or where the same type of tax for the same tax period is involved, but the amount of tax has changed as a result of an additional assessment of tax for that period or an additional accuracy-related or filing delinquency penalty has been assessed. The taxpayer is not entitled to an additional notice offering a due process hearing if the additional assessment represents accruals of interest, accruals of penalties, or both.


  4. In jeopardy situations L1058 is not required to be sent 30 days before the enforcement action; however, the taxpayer must receive a notification of a right to a hearing immediately after the enforcement action. Counsel approval of a jeopardy situation is required in addition to all other required approvals. Consult with Technical Services and area counsel when considering a jeopardy seizure. See IRM 5.11.3 and for jeopardy information.

  5. See IRM 5.11.1 for additional information on proper delivery, joint return considerations, required transaction codes, and documentation required for delivery of the L1058.

  6. If the taxpayer is deceased, the CDP notice should be sent to the executor of the estate. Consult local Counsel if there are questions as to who should receive the CDP notice on behalf of the estate.  (10-01-2004)
Supplemental Pre-Seizure Taxpayer Notifications

  1. If the L1058 was sent more than 180 days prior to the seizure date, it is still legally valid to seize. However, it has been administratively determined that the taxpayer will get a new warning of enforcement before enforcement action is taken.

  2. The warning must be documented in the case file, and it can be either:

    • Given in person or by phone that there is a deadline (not necessarily 30 days) after which there will be seizure action or

    • Given in writing if the taxpayer cannot be contacted (see Exhibit 5.10.15, Pattern Letter 3174, for an example)



    The Appeals Collection Due Process (CDP) Notice of Determination constitutes a warning of enforcement. For cases that were submitted to Appeals, a new warning of enforcement does not need to be sent unless it is more than 180 days after he CDP Notice of Determination date.


  3. Do not issue another L1058 when a supplemental warning is warranted. Taxpayers are only entitled to one L-1058 per tax assessment that advises them of their rights to a pre-levy due process hearing.

  4. A supplemental warning is not required:

    • If collection of the tax is in jeopardy

    • If enforcement has taken place in the last 180 days (enforcement only includes seizure or levy action, and the taxpayer must have been aware of the enforcement action. A pending judicial proceeding for court approval of a principal residence seizure is a seizure action. A notice of levy issued to a former employer would not be considered as enforcement since the taxpayer would have no way to know about the action. If, however, a levy is sent to a bank and a copy of the levy is provided to the taxpayer, even if there were no proceeds the taxpayer would be aware of the levy and this action would qualify as enforcement.)


  5. The L1058 is required to be sent for every module that is included on Form 668B. However, the taxpayer has had a timely warning as long as there has been warning of enforcement for at least one module included on the 668B within the last 180 days. The L-1058 notice requirement must be met for each module included in the seizure, but the timeliness of the warning is for the entity, rather than each individual module.  (10-01-2004)
Personal Contact to Advise the Taxpayer of Proposed Seizure Action

  1. In addition to the L1058 notification, the revenue officer must attempt to personally contact the taxpayer either by a phone call or field call prior to seizure. The revenue officer should attempt to meet with the taxpayer and discuss what is necessary to avoid seizure action. In situations where employee safety is an issue, the attempt at personal contact should be made by telephone.


    If the taxpayer has an authorized representative, then the personal contact, by phone or in a field call, to advise of the proposed seizure action should be made with the authorized representative, not the taxpayer unless the taxpayer has consented to such contact, a court has permitted such contact, or the authorized representative does not respond in a timely manner (see IRM for taxpayer contact provisions when the taxpayer has an authorized representative).


  2. During this contact, the revenue officer should:

    • Advise the taxpayer that seizure is the next planned action

    • Give the taxpayer an opportunity to resolve the tax liability voluntarily; if the liability is the result of an SFR assessment the taxpayer should be given an opportunity to file corrected returns

    • Provide and discuss the provisions of Publications 1 and 594 (if not previously provided)

    • Advise the taxpayer about the Taxpayer Advocate, provide Form 911, and explain its provisions; if the taxpayer indicates the seizure would create a hardship, the revenue officer will assist the taxpayer with the preparation of Form 911 and should forward the form to the local Taxpayer Advocate if the revenue officer cannot or will not provide the requested relief (see IRM 13.1.7 for Taxpayer Advocate criteria and procedures).

    • Provide the taxpayer with the name and location of the immediate supervisor if the taxpayer requests to have the case reviewed by a supervisory official

    • Document on Form 9297, Summary of Taxpayer Contact, specific actions and deadlines communicated to the taxpayer


  3. If personal contact is not made, document the steps taken to attempt to achieve personal contact and the reasons why contact with the taxpayer could not be achieved. Even if the taxpayer was previously unresponsive, the revenue officer must attempt to personally advise the taxpayer of the proposed seizure; however, the taxpayer's refusal to respond to attempted contacts should not prevent the revenue officer from submitting the seizure for approval.  (10-01-2004)
Collection Appeal Rights

  1. The Collection Appeals Program (CAP) was created to give taxpayers a chance for an independent administrative review. Taxpayers can appeal under CAP when they are told that a seizure action will be taken or has been taken. Their right to appeal under CAP is connected to a specific planned or actual collection action. See IRM 5.1.9 for additional information on how to handle appeals under this program. Publication 1660, which should be provided with the L1058 and again with the Notice of Seizure, explains the Collection Appeal Rights. The case file must be documented as to when the Publication 1660 was delivered.

  2. Appeal rights after the seizure has been conducted are contained in IRM  (10-01-2004)
Pre-Seizure Activity for Courtesy Seizures

  1. When a taxpayer's assets are located in another territory and it becomes necessary to enforce collection by seizure, Form 2209, Courtesy Investigation, will be prepared. The revenue officer in the originating territory and the revenue officer in the receiving territory each have specific responsibilities for the seizure. The approving official in the receiving territory has the final authority for approval or disapproval of the seizure.

  2. The revenue officer in the originating territory will issue the appropriate notices and due process documents to the taxpayer and advise the taxpayer of the proposed seizure. The revenue officer in the initiating territory will include the following information with the Form 2209:

    • A copy of the complete ICS history, including a history notation by the group manager indicating that they concur with the seizure determination

    • Sufficient information for the receiving revenue officer to prepare Form 668B

    • Copies of the Collection Information Statement, Notices of Federal Tax Liens, and any other relevant documents

    • Statement of facts involved, including alternatives considered, results of risk analysis, any information regarding fair market value and encumbrances, due process notifications, etc.

    • Any other relevant information


  3. The revenue officer in the receiving territory will:

    • Verify that the Notices of Federal Tax Lien are filed in the appropriate jurisdictions

    • Verify that the taxpayer was provided with all appropriate publications and appeal rights

    • Complete the appropriate records checks in the local jurisdiction

    • Coordinate with the PALS for the seizure and sale of the property

    • Prepare a draft minimum bid based on the procedures in IRM and IRM

    • Prepare all seizure documents and submit the case for approval (IRM by the receiving office.


  4. If the property subject to levy is located in a contiguous territory within easy access of the office where the assessment is outstanding, it may be advisable to have the seizure conducted by revenue officers from the territory holding the assessments. The concurrence of the appropriate seizure approving officials from both territories must be secured and, where appropriate, a revenue officer from the territory where the property is located should be requested to assist in the seizure. This coordination between territories should ensure that all local laws and conditions which might have a bearing on the seizure and sale proceedings are given proper consideration.

  5. A revenue officer in the receiving territory will make an investigation of the facts involved to determine the taxpayer's equity and interest in the property to be seized. If the investigation reveals there is no seizure potential due to insufficient equity to yield net sale proceeds to apply to the unpaid tax liability, the revenue officer in the receiving territory will furnish a report documenting these facts to the initiating office.

  6. If it is determined that there is sufficient equity to yield net proceeds, the revenue officer in the receiving territory will follow the procedures in IRM for securing managerial approval.  (10-01-2004)
Jeopardy Assessments and Seizures

  1. Jeopardy assessments are made when the taxpayer is, or appears to be, placing assets beyond the reach of the government by removing them from the United States, by concealing them, by dissipating them, or by transferring them to other persons. Jeopardy should also be considered in cases where the taxpayer's financial solvency is or appears to be imperiled. This last criterion does not include insolvency as a result of accrual of liabilities.

  2. See IRM 5.11.3 regarding jeopardy levy. Counsel approval is normally required prior to jeopardy levy. These procedures also apply to a jeopardy seizure. A jeopardy seizure requiring Counsel approval occurs when the tax is assessed and one of the following conditions exists:

    • Notice and demand for payment has not been issued

    • It is less than 10 days after notice and demand for payment is issued

    • It is less than 30 days (and the 15 day waiting period) after notice of intent to levy is issued or that notice has not been issued


  3. Although an L1058 is not required prior to a jeopardy seizure, the taxpayer must still receive certain notices, forms, and letters after the seizure. IRM outlines the appropriate notices that must be sent for jeopardy seizures.

  4. For jeopardy seizures, IRC 7429 provides that the taxpayer may request the Service to review whether:

    • The making of the assessment was reasonable

    • The amount of the assessment is appropriate

    • The levy is reasonable under the circumstances


  5. Such requests will be coordinated with the Compliance Examination office that made the assessment. The sale of seized property will generally be suspended during this administrative review process.

  6. IRC 6863 prohibits the sale of property seized by jeopardy seizure until the taxpayer has exhausted the specified administrative and judicial review procedures. IRC 6863 only applies to the sale of property and does not prohibit seizure of any type of property or rights to property of the taxpayer. However, before property is seized, a determination should be made as to whether the mere filing of a notice of lien would be adequate protection. If the notice of lien will not fully protect the Government's interest, the property may be seized and maintained under seizure until it can be lawfully sold or returned to the taxpayer.

  7. The intent of IRC 6863 is to prevent irreparable damage to taxpayers by forced sale of their property before a determination is made as to their actual tax liabilities. The Code does not prohibit levies at any time during the suspended period on such assets as accounts receivable, bank accounts, salaries, fees, etc. The application of the proceeds of such levies to the taxpayers' accounts will not cause irreparable damage to them since the full value of the assets are normally reducible to their cash equivalent by the taxpayers without financial loss to them. See IRM and  (10-01-2004)
Mutual Collection Assistance Requests (MCARs)

  1. International appraisal and seizure and sale cases include collections of treaty partners' taxes in the United States and of federal taxes in U.S. Possessions and Territories. In treaty collection cases, the Service collects the treaty partner's finally determined taxes in accordance with U.S. laws as if they are U.S. tax liabilities.

  2. There are five treaty countries with which the Service has ongoing programs for MCARs that may involve seizure and sale. The treaty partners and types of taxes covered for collection by the Service are as follows:

    • Canada All taxes

    • France Income, Estate and Gift, Wealth and other specified taxes

    • Denmark Income and other specified taxes

    • Sweden Income and other specified taxes

    • Netherlands Income and other specified taxes


  3. MCAR procedures allow for the collection of foreign taxes by a revenue officer through enforcement, including levies, liens, proofs of claim, and seizures. In the same way, the treaty partner's tax agency will collect a United States' citizen's or entity's taxes from assets located in a foreign country. All treaty collection requests to, or from, these countries are made through the Director, International (LMSB), who is the Competent Authority in all tax treaties.

  4. Collection of these liabilities takes place through MCARs. After the U.S. Competent Authority has accepted the request for treaty collection assistance, a revenue officer in International will issue a courtesy investigation requesting that a revenue officer where the asset is located conduct the seizure. The revenue officer conducting the seizure will contact the PALS responsible for the location where the seizure is being made in order to conduct the sale.

  5. See IRM for the exceptions to normal seizure and sale procedures to be followed when conducting seizures and sales on MCARs. Coordination with the revenue officer in International is essential for both the seizure and the sale, since all money collected is forwarded to the revenue officer in International for transmittal to the treaty partner through the Office of U.S. Competent Authority and is not applied to the account. Unless the revenue officer in International has made arrangements for the treaty partner to pay the expenses of sale outside of the remittance, the successful bid remittance should be secured in two parts one for the seizure and sale expenses and the balance of the remittance made payable to the treaty partner.

  6. After the sale, the PALS will prepare a memo to the revenue officer in International summarizing the sale information and transmitting the sale proceeds to him or her so the proceeds can be forwarded to the treaty partner.

  7. The seizure files should be maintained in the Technical Services office for the location where the seizure was conducted.

  8. Technical Services will be responsible for issuing the deed after the appropriate redemption period has expired when real property is sold.  (10-01-2004)
International Seizure and Sale Procedures

  1. International revenue officers conduct collection activities, including seizures, to collect federal taxes in U.S. Possessions, such as Puerto Rico, U.S. Virgin Islands, Guam, and Commonwealth of Northern Mariana Islands (CNMI). Seizures and sales are conducted under normal procedures, and local law guides are available for each of the U.S. Possessions. Other U.S. Possessions and territories include the following:

    • Baker Island

    • American Samoa

    • Howland Islands

    • Jarvis Island

    • Kingman Reef

    • Midway Islands

    • Palmyra

    • Wake Island


  2. The revenue officer should contact the PALS Manager East for assignment of a PALS to provide assistance on the appraisal and to conduct the sale.

  3. The Technical Services advisor staff in Jacksonville, Florida will be responsible for:

    • Pre-seizure case file reviews

    • Seizure advice

    • Assigning seizure numbers

    • Transmitting seizure files and documents

    • Maintaining the permanent record

    • Any other Technical Services items


  4. PALS will conduct the sale under normal sale procedures, including the collection and posting of successful bids.

Exhibit 5.10.1-1  (10-01-2004)
Form 2434B and Instructions Reference:

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Form 2434B Instructions Reference:
1. Taxpayer's name.
2. Specific type of encumbrance or interest should be shown (lien, judgment, mortgage, joint owners, nominee, transferee etc.) All encumbrances senior and junior to the Federal Tax Lien should be shown in addition to all Federal Tax Liens. Thecomplete name and address of the party holding the encumbrance or interest should be shown in the appropriate column.
3. Amount of encumbrance as of the date records were checked. The amount should be the current balance due when the secured party is contacted or the original amount recorded if the secured party cannot be contacted.
4. Date the encumbrance was created or secured.
5. Date and place the encumbrance was made a public record.
6. Date that the records were checked or the date the information was provided by the secured party.
7. Date notice of sale was mailed to all interests of record.
8. Signature of Service employee.

Exhibit 5.10.1-2  (10-01-2004)
Landlord Agreement Reference:

Date ____________
On the __day of_____, ____ an Area Director of Internal Revenue, through his duly authorized agents, has seized for the United States of America certain machinery, equipment and other personal chattels of __________ in the enforcement of a lien held by it against the said property and wishes to store the property so seized at premises where now located namely ____________ until the sale thereof.
It is therefore stipulated and agreed by and between_______________landlord of the above described premises, hereafter referred to as "landlord" and the Area Director of Internal Revenue through his authorized agent, hereafter referred to as Director, that Director will pay landlord for use and occupancy of the premises of the property so seized from the date hereof until the date on which the sale of said property has been held unless landlord is notified of termination of the said agreement at an earlier date, at the rate of $_____ per day.
It is expressly agreed and understood by and between the parties to this agreement that the U.S. Government shall not be liable for any damage or injury to person or property caused by or resulting from fire, smoke, storm, wind, hail, explosion, steam, electricity, gas, water, rain, ice, snow, riot, riot attending a strike, civil commotion, aircraft, vehicles, or from any cause or effect of nature, or any leak or flow from or into any part of the building, or from any damage or injury resulting or arising from any other cause or happening whatsoever.
In the event Landlord is a corporation the undersigned _______________hereby individually warrants that this Agreement is entered into with full power and authority on the part of the corporation and all of its stockholders.
IN WITNESS WHEREOF, the parties have hereunto subscribed their names the day and year first above written.
ATTEST BY: ________________
Title of Authorized Agent for
Internal Revenue Service (Territory Manager or PALS Manager)

Exhibit 5.10.1-3  (10-01-2004)
CASE SCENARIO #1 Reference:

Type of Business: Sanitation
Type of Entity: Corporation
Amount of Liability: $200,000
Number of Quarters Delinquent: 4
Years Remaining on Statute: 8
Status/Priority of NFTL: Filed; junior to first lienholder
Is Business Current on Deposits? Now current on deposits
Number of Employees: 25
Ability to Pay: Analysis of CIS shows ability to pay $5,000 per month, TP agrees with IA amount and has requested an installment agreement
Will Payment Amount Full Pay Within Statute Plus 5? Yes
Status of Trust Fund: 433A shows no monthly ability to pay; officer is borrowing full equity of $25,000 on property he owns personally; TFRP waiver secured through length of proposed installment agreement
Levy Sources:
Bank Account
Accounts Receivable
10 Trucks
Office Furniture, Computers
Fair Market Value:
$50,000 each
Additional Facts of Case:
Taxpayer had previous liabilities that have all been satisfied. The vehicles were all purchased at the same time and the encumbrance was established when the vehicles were purchased. Taxpayer has been denied a loan at three banks.
Recommended Course of Action:
The revenue officer should complete an equity analysis; based on a draft minimum bid approximately $50,000 (less expenses) would be the expected net proceeds. The revenue officer then conducts a risk analysis the alternative collection method would be an installment agreement. The taxpayer is a "will pay/can't pay" taxpayer because the corporation is in compliance with Federal Tax Deposits and has requested and qualifies for an installment agreement. Since the government would be at no greater risk by granting the installment agreement, the taxpayer should be given the installment agreement. The tax lien will protect the government's interest in the asset if the taxpayer later defaults and seizure action is required.

Exhibit 5.10.1-4  (10-01-2004)
CASE SCENARIO #2 Reference:

Type of Business: Sanitation
Type of Entity: Corporation
Amount of Liability: $200,000
Number of Quarters Delinquent: 4
Years Remaining on Statute: 8
Status/Priority of NFTL: Filed; junior to first lienholder
Is Business Current on Deposits? Not in Compliance
Number of Employees: 25
Ability to Pay: Unknown, TP has not complied with requests to complete CIS
Will Payment Amount Full Pay Within Statute Plus 5? N/A
Status of Trust Fund: Investigation still being completed, CIS needed for collectibility determination
Levy Sources:
Bank Account
Accounts Receivable
10 Trucks
Office Furniture, Computers
Fair Market Value:
$50,000 each
Additional Facts of Case:
Taxpayer had liabilities for a prior corporation that were satisfied through enforced collection. The vehicles were all purchased at the same time and the encumbrance was established when the vehicles were purchased. Levies on bank account and receivables have resulted in minimal funds and have not led to case resolution.
Recommended Course of Action:
The revenue officer should complete an equity analysis; based on a draft minimum bid approximately $50,000 (less expenses) would be the expected net proceeds. The taxpayer is a "won't pay" taxpayer because the corporation is not in compliance with Federal Tax Deposits and will not provide financial information. The revenue officer then conducts a risk analysis there are no reasonable alternative collection methods. The taxpayer does not qualify for an installment agreement or offer in compromise because of the non-compliance issue. Other methods of enforcement have already been considered. Since the assets have equity and the risk analysis provides no reasonable alternatives, the seizure should be recommended after all appropriate pre-seizure actions have been completed.

Exhibit 5.10.1-5  (10-01-2004)
Letter 3174(P) Reference:

IRS Office

Taxpayer Name and Address
  Letter Number: 3174(P)
Letter Date:
Social Security or Employer Identification Number:
Person to Contact:
Telephone Number:
Employee Identification Number:
Although we previously sent you a notice of our intention to collect your unpaid tax through enforced collection, our records show that you still have not paid the amount you owe. Enforced collection may include placing a levy on your bank accounts, wages, receivables, commissions, etc. It could also involve seizing and selling your property such as real estate, vehicles, or business assets.
To prevent collection action, please pay the amount you owe, now. Make your check or money order payable to the United States Treasury, and write your social security number or employer identification number on it. Send your payment to us in the enclosed envelope along with a copy of this letter. The amount you owe is:
Unpaid Amount
from Prior Notices
Penalty and Interest
Amount You Owe
If you recently paid this or if you can't pay it, call us as soon as you get this letter. Our telephone number is at the top of this letter. If you disagree with out using enforcement action, you may be able to work out another solution. Speak to the person whose name is at the top of this letter, or ask for that person's manager. If you do not agree with the results, you may then fill out Form 9423, Collection Appeal Request, to ask for Appeals consideration.
The unpaid amount from prior notices may include tax, penalties, and interest you still owe. It also includes credits and payments we have received since our last notice to you.
Copy of Letter
    Cat. No. 26846G Letter 3174(P) (Rev. 0799)


   Above limited information is intended for informational purposes only.  If legal advice or other expert assistance is required, the services of a competent professional should be sought, and this general information should not be relied upon without such professional assistance.

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