A tax levy is a legal seizure of property to pay off a tax debt. In some cases, the Internal Revenue Service (IRS) may use a tax levy to take money from a taxpayer’s bank accounts to settle a tax bill. Taxpayers who are the subject of a tax levy and believe it was done in error have options. They may be able to file a lawsuit against the body that surrendered their property, such as a bank, or against the IRS.
Either option is legally complicated, and those who are in this situation are wise to move forward with care. In a recent example, a taxpayer who attempted to navigate the system on his own did not fare well. The case involved a taxpayer who brought a lawsuit against his credit union after the credit union gave the money in his account to the IRS as a result of an official tax levy. Upon review, the court determined the taxpayer’s case, as filed, had so little merit that it did not even warrant an opportunity to amend the complaint. Instead, the court tossed out the case and left him little recourse against the credit union.
The taxpayer does still have one option: pursue remedies from the IRS. But if he does not do so carefully, he could lose this remedy as well.
The case provides an example of the importance of getting the case right the first time. A failure to build a case wisely can mean the taxpayer has no opportunity to seek a legal remedy. It is important to note that an official tax levy from the IRS generally does not come as a surprise. The IRS will send notification by mail of an impending levy, referred to as a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. As a result, the taxpayer generally has plenty of notice to prepare and fight back. The attorneys at Goldburd McCone LLP are familiar with these matters and can help to better preserve the taxpayer’s options so that your case fares better than that of the taxpayer noted above.