Tax levies are scary and are extremely debilitating for all taxpayers. Levies involve the actual seizure of property to satisfy a tax debt. Under Internal Revenue Code (“IRC”) 6331(a), the IRS has the right to seize and sell “all property and rights to property.” This means real or personal property and tangible or intangible property, including items such as a personal vehicle and residence, as well as wages, investment assets, receivables, and bank accounts.
When the IRS first levies a taxpayer, the agency will follow a set process:
- The tax must first be assessed;
- The taxpayer will be sent a “Notice and Demand for Payment”;
- The taxpayer failed to pay the assessed tax; and
- The taxpayer received a “Final Notice of Intent to Levy.”
In the case of an individual, the taxpayer will generally receive two notices of intent to levy. The first notice will be labeled “IRS Notice CP504” in the top right corner. The second notice will be labeled “IRS Notice LT11.” If the taxpayer fails to request a hearing within 30 days of receiving the LT11 notice, the IRS may levy the taxpayer’s assets.
In some case, the IRS mistakenly seizes property that belongs to someone other than the taxpayer. Under IRC § 6343(b), an administrative wrongful levy claim may be requested. In order to do so, the request must be made by a person other than the taxpayer who owes the taxes, and the request must be for the return of property believed to be wrongfully levied upon or seized. As mentioned, the person making the request generally believes that the levy was wrongful because the property seized belongs to that individual, or they believe that they have a superior claim to the property that is not being recognized by the IRS.
In order to make an administrative wrongful levy claim, a written request should be sent to the IRS Advisory Group for the area where the levy or seizure was made. Alternatively, IRC § 7426(a)(1) permits the third party to bring a civil action against the United States in federal district court seeking the same relief. Notably, if the third party submits a written request to the IRS Advisory Group and the request is denied, the third party can still bring the civil action in district court or appeal the determination through the IRS’s Collection Appeals Program (also known as a “CAP Appeal”).
When submitting the written request or bringing suit in district court, the claim should include the following:
- The name and address of the person making the claim;
- A detailed description of the levied or seized property;
- A detailed description of the person making the claim’s basis for claiming an interest in the seized property;
- The name and address of the person against whom the tax was assessed;
- The IRS office that issued the levy or made the seizure;
- The date of the levy;
- If any of the above information is unavailable, a statement explaining why that information is not available or included in the request;
- Any supporting documentation.
It is important to note that even if the IRS wrongfully seized assets, the third party only has a certain period of time to file a wrongful levy claim. According to IRS Publication 4528, if the IRS has not yet sold the seized property, a wrongful levy claim may be made at any time; however, if the seized property is tangible property and it has already been sold, a wrongful levy claim must be made within two years from the date the notice of seizure (Form 2433) was given to the owner or possessor of the property. Moreover, if the seized property was cash, the wrongful levy claim must be made within two years from the date the notice of levy was delivered.
If, following a claim, the IRS determines that it has wrongfully levied property, it will return one of the following:
- The property;
- An amount of money equal to the amount of money levied upon; or
- An amount of money equal to the money received from the sale of the property.
Anyone who receives an IRS notice titled “Final Notice of Intent to Levy and Notice of Your Right to A Hearing” should immediately contact a tax attorney. The Wilson Firm has helped countless taxpayers avoid IRS levies and successfully assisted taxpayers in resolving wrongful levies.