Will Levies Go the Way of Dinosaurs?
The Act imposes substantial new roadblocks to the IRS' use of levies. These roadblocks are so substantial that it may be the rare taxpayer who in the future is actually subjected to one.
First, Act §3421 requires the IRS to change its procedures so that any levy or filing of a notice of tax lien be reviewed by a Revenue Officer's supervisor before it is done. Disciplinary action would be taken against the Revenue Officer or supervisor for violating this rule.
Second, Act §3445 amends Code §6334 to require the advance written personal approval of a District Director or Assistant District Director for any levy on real or tangible personal property used in an individual taxpayer's trade or business. For levies on principal residences of the taxpayer, advance written approval from a judge or magistrate of a district court will be required. Finally, where the balance due does not exceed $5,000, no levy may be made on any real property used as a residence by the taxpayer or any other person.
Third, under Code §6331(d) of current law, a Revenue Officer planning to make a levy must send a "notice of intention to levy" at least 30 days in advance in order to give the taxpayer time to satisfy the liability or make other collection arrangements before the levy occurs. Act §3401(b) adds a new Code §6330 which would require the Revenue Officer to include a notice that the taxpayer can protest the proposed levy to the IRS Appeals Office during the 30-day period. This provision applies to levies on all taxpayers, not onlyt individuals. If the taxpayer protests, the levy may not take place during the Appeals Officer's consideration of the matter.
The Appeals Officer is charged with verifying that the IRS has taken all appropriate procedural steps. He or she also must consider whether any collection alternatives, such as bonds, substituting assets, installment agreements, or offers in compromise would be more appropriate. The Appeals Officer must balance "the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary." If the taxpayer did not receive a notice of deficiency (e.g., because it was sent to a wrong address) or did not otherwise have an opportunity to dispute the underlying tax liability, the Appeals Officer may also consider whether the tax is actually owed.
If an Appeals Officer's resolution is not satisfactory to the taxpayer, the taxpayer has 30 days from the date of the Appeals Officer's decision to petition the U.S. Tax Court. A Tax Court judge or special trial judge will reconsider the same matters considered by the Appeals Officer. Once again, the levy may not take place until after the Tax Court proceeding is concluded, and only then if the Court agrees.
Availing oneself of the levy appeal procedure has only one downside: The statute of limitations on collection is suspended during the process. However, it will be the rare taxpayer who receives a notice of intention to levy who will not want to stop the levy. Accordingly, nearly every levy can be expected to be appealed so that the taxpayer can put off the IRS for possibly one to two years while the Appeals and Tax Court proceedings occur. Given that any levy can be stopped dead in its tracks this way, will Revenue Officers ever use the levy again as a collection tool?
A similar procedure for Appeals and Tax Court consideration of a protest to the IRS' filing of a notice of tax lien is created by Act §3401(a), creating new Code §6320. This procedure is likely to be used far less frequently, however, as it is available only after the IRS files a notice of tax lien and it appears that the notice will remain filed until an Appeals Officer or judge directs it to be removed, although the statute is not entirely clear on this last point.
These new Code §§6320 and 6330 apply in the case of tax liens filed and notices of intention to levy issued after January 18, 1999.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.