The IRS has a variety of tools at their disposal when a person or company owes back taxes. They can repossess non-liquid assets that the person owns, such as their home or car or other property. They can take money out of the person’s savings accounts and investments. They can repossess basically everything that person owns.
But sometimes the IRS makes mistakes. They may seize property that belongs to a third party not involved in the tax issue. When that’s the case, a wrongful levy claim must be filed by the person who actually owns the property. Filing the claim is the main legal recourse to keep the IRS from taking the property, or to facilitate a return of the property that was already taken.
If the IRS has taken property that belongs to you because of the actions of a person who doesn’t own that property, you should talk to a lawyer. Your attorney can help you get the claim filed so that the process goes as smoothly as possible. They can also help you prove that the property actually does belong to you.
It’s good to have legal counsel when you’re facing the IRS, even in cases like this, where you’ve done nothing wrong. The goal of the agency is to be repaid the money they are due. They don’t appreciate needing to spend time giving back assets that were supposed to cover someone’s debts.
What to Do
There are three main options for people who are the victim of a wrongful levy:
- File a claim in writing with the administrative part of the court.
- Start civil proceedings against the government through the US District Court.
- Go to court after your administrative efforts have all failed.
If you want to make a successful claim, it is imperative that the property that was levied belongs to you. You might also be successful if your claim on the property is better than that of the targeted taxpayer.
One of the most common examples is when two people own a bank account together. They might be spouses, or they might be business partners, or they might have other reasons for sharing. When one of those people has back taxes that they owe, the IRS might drain the shared bank account of its funds. But if you’re the one who earned and deposited the funds into the account, you can file a claim to have them returned.
Similarly, if the other party owned a portion of the funds, but you owned the majority, the IRS might take the funds that belong to them. But you have a right to get back the funds that are yours, since you aren’t liable for the other person’s delinquent taxes. There may be some exceptions for cases in which the two people owning the account are spouses who have filed a joint tax return with discrepancies.
In order to make a successful claim, you will need to give the following:
- Your full name and current address
- The full name and current address of the targeted taxpayer
- The exact office of the IRS that seized the property, along with the date of the seizure or levy
- Detailed information about the property that was levied, to prove that you are familiar with it
- Proof that you have a better claim to the property than the taxpayer
- Whatever additional information might help support the claim
There are limitations on the amount of time you have to file your wrongful levy claim. That’s part of why talking to an attorney is so helpful. They can make sure that your claim is filled out with all the necessary evidence and then filed well within the bounds of the time constraints.
When the property that was levied is a tangible asset rather than liquid funds, you are able to make the claim whenever you want. You aren’t subject to the same rules and limitations. The IRS must still have the property on hand, though. The longer you wait, the higher the chances that it will have been liquidated to pay the tax debt.
If the property has changed hands since the IRS seized it, you can ask to be given back the profits from the transaction. You will need to do this in the two-year period following the initial levy. After two years, you’re no longer eligible to receive this compensation.
Your claim might be denied if the IRS decides that you have not provided sufficient proof of your right to the property. At this point, you’ll begin the appeals process with the Collection Appeals Program. This is a process that involves a lot of paperwork and hassle, so it’s best to leave it to your attorney to handle for you.
If you have received a levy judgment from the IRS regarding your money, investments, home, vehicle, or other tangible assets, time is of the essence. Talking to a lawyer and filing your claim are the two best ways to avoid losing the property.