In Nina Olson’s recent report to Congress, the head of National Taxpayer Advocate, addressed challenges and concerns facing US taxpayers when dealing with the IRS.
In the report to Congress, Nina Olson discussed the impact of the recent government shutdown. A major point of discussion before and during the shutdown was the permissible scope of IRS levies, bank accounts, wages and other enforcement activities. Under the Anti-Deficiency Act, federal funds may not be spent in the absence of an appropriation except where otherwise provided by law. One exception provided by law is for “emergencies involving the safety of human life or the protection of property”. Although not stated in the law or Justice Department guidance, the IRS Office of Chief Counsel has interpreted the “protection of property” exception to apply only to the protection of government property and not to taxpayers’ property such as bank accounts.
Nina Olson said this narrow interpretation can cause severe harm to taxpayers with delinquent unpaid back taxes. When the IRS issues a levy to a bank, the bank must freeze the taxpayer’s account for 21 days, and then if the levy has not been released, the bank must turn the funds over to IRS. The Code requires IRS to release a levy if it has determined the levy “is creating an economic hardship due to the financial condition of the taxpayer“. However, IRS’s legal interpretation of the Anti-Deficiency Act would not permit personnel to release levies on bank accounts or wages even in extreme cases, such as where a taxpayer needs the levied funds “to pay for basic living expenses or even a life-saving operation”.
If IRS does not change its interpretation of the Anti-Deficiency Act, her report recommends Congress amend the Act to ensure that taxpayer protections and rights enacted by Congress remain available when IRS takes enforcement action such as bank or wage levy against a taxpayer during, or has taken enforcement action just prior to, a government shutdown.
If you are an individual or a business taxpayer facing the threat of IRS levies, we can help you resolve your tax problem and release all levies. We can help you with delinquent unfiled tax returns, employment 940/941 payroll problems, tax audits, appeals, unpaid back tax resolution through payment plans and lump sum offer in compromise.
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