The IRS has collected roughly $114 million in profits over the past four years from the sales of seized taxpayer assets, but failed in its obligation to protect those Americans privacy from potential hackers and thieves, an investigation reveals.
The Treasury inspector general for tax administration found that the agencys property appraisal and liquidation specialists failed to document personal items found in seized vehicles and did not delete personal information such as GPS and navigation data or codes to garage door openers.
If these systems are not reset to the original factory settings, there is a risk that the third-party purchaser of the vehicle can gain access to the taxpayers personal information or property. For example, the purchaser could use the vehicle navigational equipment to locate a taxpayers residence and then use the garage door opener to gain access to the home, auditors wrote in the report.
Although the asset seizure cases sampled in the latest review were properly inventoried, safeguarded, and handled professionally, a similar audit two years ago found that 30 percent of IRS seizures of taxpayer property had not complied with the law.
Auditors made several recommendations to the IRS to better protect taxpayers, including amending IRS guidelines to allow taxpayers to re-enter seized vehicles to delete sensitive personal information from location systems and reclaim personal items left inside, a practice that is prohibited.
In its response to the audit, the IRS said it would consider revising its procedures to allow taxpayers to either re-enter the seized vehicle to reset navigation or garage door systems or request that, at the taxpayers cost, a trained third party enter the vehicle to clear the information.
Taxpayer advocates say the numbers and practices revealed in the latest report re-emphasize the overreaching power of the IRS, which watchdogs have warned against for years.
The level of callousness displayed by the IRS toward the personal privacy of those from whom they have seized assets is astounding, said Richard Manning, president of Americans for Limited Government. First, they take their property, then rub salt in the wound by failing to erase personal information prior to re-sale with potentially disastrous consequences.
When a taxpayer still owes outstanding debts to the government after letters, telephone calls and personal visits from IRS officials, the agency will weigh the taxpayers ability to pay a delinquent bill and discuss alternative payment methods such as installment agreements or settlements. If the taxpayer still cannot make up the debt, the IRS has the authority to take the taxpayers funds or property to pay the tax.
Such seizures and their accompanying auctions brought in north of $22 million for the IRS in fiscal year 2014, according to the audit. That is down from nearly $31 million the previous year. The proceeds are supposed to be applied to taxpayers outstanding tax liabilities.
Until the IRS Restructuring Reform Act of 1998, revenue officers were allowed to participate in the sales of seized assets, which prompted taxpayers to file complaints that the IRS was overaggressive in enforcing tax law to enrich its own revenue.
Thus, the IRS property appraisal and liquidation specialists were brought in to oversee the sale of seized property and protect taxpayers.
In its recent review, the auditor attended six IRS auctions and reviewed a sample of 44 seizure cases. The audit found that the IRS agents worked efficiently in selling off seized items.
But watchdogs say the policy omissions highlighted in the recent report raise serious concerns about how well taxpayers are being protected when their assets are seized.
Short of throwing someone in jail, seizing assets is the heaviest weapon in the governments tax enforcement arsenal. It should be treated that way by those at the tax agency who handle it, and this latest report suggests there are still precautions that should be taken to prevent collateral damage, said Pete Sepp, president of the National Taxpayers Union.