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

Win the Case but Lose the Fee: a Levy Deprives Lawyers of a Contingent Fee.

The Internal Revenue Code provides the IRS with potent administrative collection powers that are not well known to the legal profession as a whole. As a consequence, capable lawyers can make mistakes because they are unfamiliar with some of the collection tools employed by the IRS. A Middle District of Florida case illustrates this point, showing how a successful group of lawyers lost a contingent fee because they did not know how to respond to an IRS levy.

In Austin and Laurato, P.C. v. United States, 2012 U.S. Dist. LEXIS 167517 (M.D. Fl. Nov. 26, 2012), the plaintiffs were a group of lawyers who had been retained on a contingent fee basis to challenge the seizure of funds by the City of Tampa on behalf of three clients.Read More

The Tax Court Holds that An Innocent Spouse May Recover a Refund Following an IRS Levy on Joint Property.

When a taxpayer applies for innocent spouse relief, the IRS cannot levy against the taxpayer’s property while the administrative request is pending or while review of the determination on that request is pending in Tax Court. I.R.C. § 6015(e)(1)(B)(i). The IRS can levy against joint accounts, however, if state law provides that each joint holder has an unconditional right to withdraw the entire amount on deposit. United States v. Nat’l Bank of Commerce, 472 U.S. 713, 722-23 (1985).

What happens when the IRS levies against a joint bank account in which a taxpayer with a pending request for innocent spouse relief has an interest?Read More