A Little Bit of Tax Reform: A Look at Wrongful Levies

Tax Cuts and Jobs ActCongress got something right.

In the course of enacting the Tax Cuts and Jobs Act, Pub. L. 115-97, the Senate added a provision addressing a recurring problem by extending the time to file a wrongful levy action from nine months to two years. It also gave the IRS authority to return money seized or monetary proceeds of property sold following a levy within two years of the date of levy. To put the changes in context, a bit of background is in order.

Congress has given the IRS very potent collection tools; it can impose a lien on a taxpayer’s property, and it can seize property from a taxpayer, all without a court order.… Read More

Wrong Way: How Not to Attack an Alter-ego Tax Lien.

A recent Sixth Circuit case illustrates the importance of selecting the right route in attacking an alter-ego tax lien, which arises when the IRS contends that someone holding property is actually the alter-ego or nominee of someone who has unpaid tax liabilities. Morris v. United States, 2013 U.S. App. LEXIS 17707 (6th Cir. Aug. 23, 2013).

The case started when Mrs. Morris received a Notice of Federal Tax Lien indicating that the IRS was asserting a lien against property that she held on the theory that she was acting as the alter-ego or nominee of her husband. She then filed a complaint, alleging that the filing of the lien without a prior hearing violated her due process rights and requested declaratory relief.Read More

Alter Ego Tax Liens: Refund Claims Are Barred By The Substitution of Value Remedy.

The IRS has a number of third-party collection theories which it employs to collect taxes from someone other than the taxpayer, including an alter ego theory. Alter ego cases are tricky for the collection target, as certain of the normal remedies a taxpayer has don’t apply. For example, an entity that the IRS has classified as an alter ego does not enjoy the right to obtain a collection due process hearing in the IRS appeals unit. I.R.M. 5.12.1.2.11 (01-09-2009). A recent case from the Southern District of Ohio highlights another complication; the person who has been tagged as an alter ego cannot bring a normal refund suit.Read More