This article was recently written for Yahoo Finance under my byline, James Skye.
Under authority of the Internal Revenue Code, the IRS has the ability to seize certain assets held by a taxpayer, such as real property. Once these assets are seized or acquired for nonpayment of tax, they are generally sold at auction to try to recoup the outstanding liability.
Here are five frequently asked questions about the government auction process.
1. How do I find out what auctions the government is currently holding?
Despite what you may hear on the radio or on television, there is no branch of the IRS or government that sends out an exclusive mailing list to those who sign up, and certainly, never any kind of fee is charged by the government for the right to this information.
Visit the following web site for information on what is being auctioned, broken down by state. www.treasury.gov/auctions/irs/
2. How can I pay and will the government help me finance the purchase?
Each auction carries its own terms that will be posted at the auction regarding the sale and what types of payment will be accepted. Cash, certified, cashier’s, or treasurer’s checks are the general forms of payment. The government does not also provide separate financing to successful bidders.
3. What happens to the IRS lien that is on the property?
Most real estate and parcels of property that are sold by the IRS at auction have been encumbered by a Notice of Federal Tax Lien. When the property is sold and the ownership passes to the new owner, the lien on the property is discharged.
The purchaser must deal with any encumbrance that is on the property and recorded prior to the IRS filing their lien, such as the initial montage loan. This means the buyer may need to pay off these loans or other claims on the property before they can assume ownership.
4. What if the asset I bought is junk?
Two phrases: ‘where is,’ ‘as is.’ In many cases, you may not even see the asset at the place of auction. Generally, the Notice of Public Auction will grant opportunity to inspect the property, vehicle, etc. ahead of time. Once you have purchased the asset, there is no warranty provided by the government, and you have no recourse to turn it back over to the IRS.
5. How is the sale conducted?
This may be up to state law and any local rules established by the auctioneer. Internal Revenue Code does require that seized property be sold by public auction, often held on the premises of the property up for auction, or by sealed bid auction.
You will need to review the notice of sale for specific requirements. The treasury web site contains links to the individual notices of public or sealed-bid auctions.
For more information, visit www.treasury.gov/auctions/irs/