by Brian Mahany
The IRS is getting ready to ask Congress for more power. Power to levy rental income and non-wages. Prior to 1998, the IRS had broad power to seize property of delinquent taxpayers. Congress curtailed their power that year amid concerns of widespread abuse. Levies went from 473,000 in 2008 to just 75,000 two years later.
During the last decade, levy numbers are back up and now exceed 667,000 according to figures quoted by the Treasury Inspector General for Tax Administration.
TIGTA says the IRS is doing a good job of policing itself and supports the move. Practitioners and taxpayers tell a different story.
The IRS says it needs the increased power to make sure that delinquent taxpayers pay their fair share. They say that delinquent taxpayers represent a burden to the millions of Americans who pay yearly.
The taxpayers that have commented on the proposal have horror stories of accounts being levied without notice, appeal requests that were ignored and mistaken identity. Some practitioners worry that by authorizing the seizure of rental income, the IRS will force more people to default on mortgages and further exacerbate the mortgage crisis.
There are no easy answers but levies are a very powerful tool that can easily bankrupt a business or lead to the loss of one’s home or car.
A levy is essentially an administrative order that allows the IRS to seize bank accounts or garnish wages.
The IRS is required to send out notices before taking such drastic action. The final notice is a Notice of Intent to Levy. For most taxpayers, that is the last warning they will receive. It also provides taxpayers a final 30 days to appeal. The Inspector General’s report says that such an appeal will generally give the taxpayer an extra 5 months breathing space.
What do we think? Many taxpayers ignore the warning letters and don’t seek help from an accountant or tax attorney until the IRS has seized their bank accounts. Then it is often too late for an appeal (although the IRS can still grant a discretionary due process hearing.)
Once the levy process begins, however, we unfortunately find IRS revenue agents are sometimes unresponsive or unavailable. That can sometimes result in the closing of businesses, foreclosures and bankruptcy.
We understand the need for the IRS to collect taxes but until their track record with the exiting levy law is near spotless, we disagree with the grant of additional powers.
The unfortunate fact of levy authority is that the remedy is administrative. There is no independent judge making findings or reviewing the file to insure that all required notices were first sent. Although even courts make mistakes, we think errors are more common when the revenue agent acts as both prosecutor and jury.
If you receive a final Intent to Levy letter, contact an attorney immediately. Once the IRS sinks its teeth into you they are very reluctant to let go. It is much easier to stop the issuance of a levy than to reverse one.
The tax lawyers at Mahany & Ertl have helped people across the United States with a wide variety of tax problems. With offices in Milwaukee, San Francisco (satellite), Detroit and Portland, we can help you with IRS problems anywhere in the country. For a confidential consultation, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at
Mahany & Ertl – America’s Tax Lawyers