The Treasury Inspector General for Tax Administration today released Coordination and Procedures for Foreclosures Can Be Improved (2010-30-119):

The IRS was inconsistent in how it processed foreclosure cases and coordinated with local United States Attorneys’ Offices (USAO). …

When a taxpayer fails to pay taxes owed, the IRS may attach a claim to a taxpayer’s real property — a claim known as a Federal Tax Lien. The IRS files a Notice of Federal Tax Lien (NFTL) in appropriate local government offices, notifying interested parties that a lien exists on the property. When property has a Federal Tax Lien attached, the IRS may collect proceeds from a foreclosure sale to cover the taxes owed.

A foreclosure is either judicial or non-judicial. The USAO is responsible for protecting the Federal Government’s interest in judicial foreclosure sales, while the IRS is responsible for protecting the Federal Government’s interest in non-judicial foreclosure sales. Although the IRS does not have the primary responsibility to protect the Federal Government’s interest in judicial foreclosure proceedings, it must coordinate such proceedings with the USAO.

TIGTA reviewed whether the IRS effectively and efficiently protects the Federal Government’s interest during foreclosure proceedings when an NFTL has been filed. TIGTA found that the IRS could improve its coordination with the USAO for judicial foreclosures. TIGTA also found that the information the IRS provided to the public for submitting a timely notice of sale for non-judicial foreclosures was inconsistent with the Internal Revenue Code.