The Internal Revenue Service announced today it will auction more than 8,000 silver coins, valued at $85,000, seized from the home of a Washington area man convicted last May in the largest gold and silver fencing operation ever uncovered in Washington.

IRS officials said the auction is an unusual move for the agency but is necessary to recover $75,653 in taxes owed by Joseph G. Martin, 37, of Burtonsville, following his guilty plea on charges of tax evasion, racketeering and solicitation to commit embezzlement.

The coins -- mostly turn-of-the-century silver dollars suspected of having been stolen by a network of thieves from collections in scores of Washington area homes -- will go on the auction block at 10:30 a.m. next Thursday in the U.S. Customs Building at 40 S. Gay St. here.

To publicize the auction, IRS officials have notified most Washington-Baltimore area coin dealers, and put the coins on display today at IRS headquarters for reporters and TV cameras.

Martin and more than 40 suspected burglars were arrested in 1981 in an elaborate undercover FBI-D.C. police operation called "Operation Greenthumb."

Law enforcement officials said Martin and a second man, Alan C. Danneman, masterminded the fencing scheme, netting at least $3 million in gold, silver and other items stolen from area homes by a loose confederation of burglars.

At the time, Martin operated the Royal Carpet & Tile company at 1785 Florida Ave. NW in Washington, suspected by police of being a major point for burglars to fence stolen items.

In March 1981, FBI agent Mike Hartman said today, agents and detectives planted a hidden microphone in the building and "recorded conversations Mr. Martin had with the burglars."

Later, Martin was arrested and police confiscated silver, gold, Persian rugs, jewelry and $209,000 in cash from his Maryland home.

Martin pleaded guilty in May this year and was sentenced to eight years in prison in July.

Danneman also pleaded guilty to racketeering and tax evasion charges but has not yet been sentenced.

In winding up Martin's case, IRS officials said today he still owes the government $75,653 in taxes, plus interest and penalties, for 1980.

IRS spokesman Domenic J. LaPonzina said all the suspected loot confiscated by court order from Martin's home "is considered income he received in 1980" and therefore taxable.

LaPonzina would not disclose Martin's total tax liability for 1980 but noted, for example, that the $209,000 cash seized at Martin's home was turned over to the IRS by the FBI to help satisfy the liability.

As for the coins, LaPonzina said efforts were made to find their original owners, but "most coins are hard to identify." The bulk of them have gone unclaimed, he said, and will now be sold at auction.

The collections consist chiefly of silver dollars, some dating back more than 100 years. A few, such as a so-called Morgan Silver Dollar minted in 1893, are valued at $700 to $800 each, LaPonzina said.

There are also more recent coins including 40 Eisenhower dollars and 20 Susan B. Anthony dollars.