A district court in Michigan dismissed a complaint challenging an Internal Revenue Service (IRS) tax levy on a couple’s home. The couple owed income taxes of around $300,000 and payroll taxes of another $161,000. They filed a quite title action pursuant to 28 USC 2410, and they also filed an unauthorized collection action under Internal Revenue Code § 7433 seeking damages. The court held that it lacked jurisdiction to hear either claim. With respect to the quiet title action such actions are available if an IRS tax lien is filed, but not when a tax levy is served. As most tax problem attorneys know there is a big difference between a tax lien and a tax levy, and the court held that the proper method of fighting a tax levy is not through a quiet title action.
The court also dismissed the unauthorized collection action because the couple hadn’t exhausted their administrative remedies. Internal Revenue Code § 7433 allows a taxpayer to sue the IRS if it has engaged in unlawful collection actions such as an improper tax levy; however Treas. Reg. § 301. 7433-1(d) bars a suit until after a claim has been filed with the IRS. Even though the couple had notified the IRS of their claim the court held that the format they used was incorrect since they didn’t address the claim to the right individual at the IRS, list their current home address and telephone number, or meet several other formalities.
The results in this case were not particularly surprising. It does, however, once again point out the importance of completely understanding all of the IRS rules and tax procedures. It also once again illustrates that the IRS can and does seize taxpayers’ homes, and those who assume it can’t happen are mistaken.
Tax problems need to be dealt with at an early stage. It is possible that an offer in compromise or an IRS payment agreement could have saved this couple’s home. If you need help with a tax problem of any kind contact the tax lawyers at Brager Tax Law Group, A P.C.