Unlawful IRS Garnishment of Income and Assets
The IRS has the legislative authority to “levy” a taxpayer’s
income and assets when there is a demand for payment and there
has been a refusal or an inability to pay by the taxpayer
subject to the levy. There are statutory limitations on the
legislative authority delegated to the IRS by Congress in
circumstance where an IRS levy of income and assets creates an
economic hardship on individuals and businesses.
Congress has passed law clearly indicating that it does not want
the IRS to levy a taxpayer in any circumstance which results in
an economic hardship[1] to the taxpayer.
Tax regulations have defined economic hardship as money needed
for reasonable basic living expenses[2]. In general, the IRS is
prohibited by law from levying income or assets that will
deprive a taxpayer of food, housing, transportation, medication
and other reasonable and basic necessities.
We are witness to thousands of wage garnishments that cause
economic hardship to taxpayers, thereby exceeding the authority
to levy delegated to the IRS by the Congress. Taxpayers
throughout the U.S. have experienced this IRS abuse of power and
discretion of its power to levy. The IRS routinely levies the
assets and income of taxpayers that render families unable to
pay expense necessary for basic survival.
Notwithstanding the clear intent of the law precluding a levy
that creates an economic hardship, taxpayers throughout the U.S.
will testify to their Congressional representatives, and we will
document in the IRS Forum, that the IRS regularly exceeds its
legislative authority to levy[3].
The IRS Forum will accomplish four objectives from a data base
of unlimited duration based upon actual case histories of IRS
levy abuse case histories:
1. It facilitates the accumulation of actual case histories of
levy abuse cases. One taxpayer complaint to a Congressman or
Senator gets little or no attention because Congress cannot
interfere with the administration of the tax laws by the IRS.
However, when large scale abuses are documented and collected
within the IRS Forum, this data will be available to Congress to
evaluate in considering any tax legislation to correct the
documented abuse cases.
2. It empowers taxpayers to unite with other taxpayers for the
enhanced ability to communicate their problems to the public and
to the Congress more effectively and with greater impact. It
also gives taxpayers the opportunity to communicate with one
another through a message board, to share problems and consider
group actions in the IRS levy abuse cases.
3. It is a vehicle to educate the Congress, the media, and the
public about documented IRS levy abuse case histories.
4. It creates “talking points” for those individuals and groups
looking facilitate IRS reform and or basic tax reform with
documented cases of IRS levy abuses contrary to the law.
Given the large amount of unreasonable levies against taxpayers,
Congress added a new statute in 1998[4] requiring the IRS to
provide a Notice of Levy to taxpayers. The statute also gave
taxpayers the “Due Process” right to appeal a Notice of Levy
within 30 days of the Notice date for the Appeal. During that
procedure, the taxpayer can offer collection alternatives like
an Offer in Compromise or an Installment Agreement.
There is a systemic problem with the “Due Process” Appeal. If a
paycheck or a bank account is levied (for example, containing
the money for food or with the payroll for a small business),
the bank must release that money to the IRS in 21 days.
Therefore, collection is completed before the case is received
by an IRS Appeals Office.
The situation is worse for salary garnishments which are
continuous. There is a large body of taxpayers living from
paycheck to paycheck who suffer when ongoing paychecks are
levied. Many taxpayers have little choice but to leave their
place of employment and look for another job. The “Due Process”
hearing is ineffective for salary garnishments because most
families cannot do without even one week’s paycheck.
The most onerous of levies is the levy of a bank account of a
business which contains money for payroll and other business
expenses. The IRS takes the position that levy relief for
“economic hardship” only applies to individuals and not to
businesses.[5]
The IRS continues to levy families even if that levy violates
the law that restricts the IRS power to levy in “hardship”
cases. Although Congress made it more difficult for the IRS to
be abusive and excessive in hardship cases with Due Process
appeal rights, those garnishments proliferate. More assistance
is needed from the Congress to remedy the IRS abuses of existing
law.
As a non-profit tax exempt organization, the IRS Forum cannot
lobby the Congress. Members of the IRS Forum can join together
to document the IRS abuse case histories. That group will be in
a position to unite as an independent organization, elect
leadership and lobby the Congress (if it chooses) on the levy
abuse problem. It should be sufficient to have taxpayers archive
their abuse case history into the data base of the IRS Forum.
Ultimately, when the number of abuse cases hits critical mass,
the media, the public, and the Congress will get the message by
reason of the large size of the documented levy abuse cases.
Members of the House and Senate get constituent complaints on a
daily basis related to over zealous levies and the hardship
created when the IRS levies reasonable and necessary living
expenses. It is hoped that those who contact their Congressional
representative will join and unite with similarly situated
taxpayers in the IRS Forum. Taxpayers are empowered by uniting
as members of a larger group which has the potential to grow
large enough to get the attention of the Congress for
assistance.
This document was prepared by irstaxattorney[6] and is intended
as a public educational service.
Please address any questions or comment to irstaxattorney@irsforum.org.
[1] Congress enacted §6343(a)(1)(D) of the Internal Revenue Code
which states that the IRS must release a levy in situations
where the IRS has determined that the levy is creating an
economic hardship.
[2] The term economic hardship is defined in §301.6343-1(b)(4).
These regulations indicate that the levy must be removed if
satisfaction of the levy in whole or in part will cause an
individual taxpayer to be unable to pay his or her reasonable
basic living expenses. The determination of a reasonable amount
for basic living expenses is made by the IRS and will vary
according to the unique circumstances of the individual
taxpayer. In determining a reasonable amount for basic living
expenses, the IRS will consider a taxpayer’s age, employment
status and history, ability to earn, and number of dependents.
The IRS will consider as reasonable basic living expenses as
amounts reasonably necessary for food, clothing, housing
(including utilities, home-owner insurance, home-owner dues, and
insurance), transportation, current tax payments (including
federal, state, and local), alimony, and expenses necessary to
the taxpayer’s production of income (such as dues for a trade
union or professional organization, or child care payments which
all the taxpayer to be gainfully employed).
[3] The authority of the IRS to levy is found in section 6331 of
the Internal Revenue Code.
[4] Section 6330 of the Internal Revenue Code as added in the
IRS Restructuring and Reform Act of 1998.
[5] The IRS argues that section 6343 of the Code, preventing a
levy for “economic hardship,” only applies to individuals. That
is an interpretative opinion that has not been litigated. It is
more probably that Congress did not want to give the IRS
authority to levy a business bank account, inventory, or
accounts receivable if the levy will close down the business. It
is counter productive for the IRS to levy assets that will force
a business into bankruptcy in circumstances where the ongoing
business can afford to pay its tax liability in an Installment
Agreement.
[6] IRStaxattorney is a tax attorney who specializes in IRS
controversies, issues and problems. For that reason we see IRS
abuses of their power to levy on a daily basis. It is hoped that
others who practice before the IRS will also have their abuse
cases posted to the IRS Forum. The IRS Forum does not accept
advertising and there are no membership fees. The IRS Forum
depends on voluntary donations (tax deductible under section
501(c)(3)) for its support for editors and other basic staffing.
Presented by Alvin Brown and Associates, tax
attorney, formerly with the Office of the Chief Counsel of the IRS.
Call us for all IRS tax issues, problems and emergencies.
Protect yourself from IRS intimidation, errors, and penalties.
www.irstaxattorney.com
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ab@irstaxattorney.com -
(888) 712-7690 - (703)
425-1400
