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Wednesday, February 28, 2007
Court cases that allow suing the IRS Court Cases that allow Suing the Government on Taxes
In Miller v. Standard Nut Margarine Co, the court found that "special and extraordinary facts and circumstances"
warranted the granting of an injunction against the IRS. The IRS sought to impose a tax on oleomargarine against Standard
Nut, despite the fact that three Federal District Courts had held that oleomargarine was not taxable under the statute.
Standard Nut argued that if it were required to pay the tax prior to seeking a refund, its business would
be destroyed. The Supreme Court agreed that the refund remedy was inadequate and held that the Anti-Injunction Statute
did not apply in this case. The Court later clarified the exception in Enochs v. William's Navigation and
Packing Co. In that case, the IRS claimed that the crews of fishing vessels were employees and not independent contractors
and they went after William's for Social security and unemployment taxes. Williams filed for injunctive relief and argued
that if he had to pay the taxes, he would go out of business. The Supreme Court held that the mere lack of legal remedy
was insufficient to issue an injunction against the IRS. The taxpayer also had to show that "under the most liberal
view of the law and the facts, the United States cannot establish its claim." The court held that Williams had
failed because the question was not whether Williams could ultimately prevail, but whether the IRS had acted in "good
faith with an honest belief that the tax was due." In South Carolina v. Regan, the Supreme Court
addressed the issue of the Anti-Injunction Act once again. In that case the state requested that the Supreme Court accept
original jurisdiction over the issue or taxability of interest on state bearer bonds. The court held that the Anti-Injunction
Act did not apply because the state was not the ultimate taxpayer and it should not be forced to rely on a case by a third
party taxpayer.
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Tuesday, February 27, 2007
Court Actions Against LeviesCourt Actions Against Levies
In Gordon, 322 F. Supp. 537 (EDNY 1970), an individual sued the IRS for levying her wages for taxes
that were owed by corporations owned by her parents. Her signature had been forged on a corporate signature
card. The court ruled that Section 7426 governed the case because an assessment had not been made against
the plaintiff. The court could issue an injunction since Section 7421(a) did not govern. In
Monsky, 297 F. Supp (EDNY 1968), The court granted an injunction because the collection
of the tax would cause irreparable injury and the IRS could not prevail under any circumstances. The plaintiff
argued that the collection of the tax would result in the loss of his insurance policies and business and that the IRS could
not prevail because the assessments were made after the statute of limitations had run.
In Logan Planing Mill Co. 212 F. Supp 906 (D. W. Va. 1962), the court allowed an injunction suit by
a third party. The wrongful taking of a third party's property by the IRS is not within Section 7421.
In Helvey, 199 F. Supp (WD Okla. 1961), the plaintiff argued that her signature was forged on joint
returns by her husband. The returns did not reflect any of her income. The IRS assessed
her and the IRS argued that the joint return was ratified by the fact that she signed the tax court petition.
She argued that she signed the petition because her husband's attorney promised her that her signing would not cause a
problem for her. The court ruled in her favor and granted an injunction.
In Kamholz,
94 TC 11 (1990), the IRS issued a Statutory Notice of Deficiency and the individual petitioned the Tax Court.
The IRS sent a final notice of levy while the actions were pending. The IRS had not invoked jeopardy
assessment procedures. The court held that the IRS failed to prove the assessments were not the subject
of the matters pending before the court and the court enjoined the IRS from further collection proceedings. Most of the time injunctive relief against the
IRS is denied because of the Anti-Injunction Act. In Williams Packing and Navigation Co,
370 US 965 (1962), the Supreme Court said that the lower court's reliance on the doctrine of Miller v. Standard
Nut Margarine Co, 284 US 498 (1932), did not apply because the IRS's claim had foundation. In Church
of Scientology of California 920 F2d 1481 (9th Cir. 1990, the court ruled that the anti-injunction act precludes
granting of injunctive relief against the IRS to restrain tax assessments. In Bilbo, 633 F2d 1137 (5th Cir.
1981), the court ruled that even though the assessment was based on gambling information from an illegal wiretap, the anti-injunction
act prevented the taxpayer from restraining the IRS from collecting the tax.
In Blech,595 F2d 462 (9th Cir. 1979), the court held that it had no jurisdiction over a suit to enjoin
the collection of taxes because of the anti-injunction act.
In Professional Eng, Inc. 527 F2d 597 (4th Cir. 1975), the court denied injunctive relief when the
taxpayer challenged the constitutionality of various provisions of the Internal Revenue Code. In Westgate-California
Corp, 496 F2d 839 (9th Cir. 1974), the Court of Appeals ruled that the district court did not have the jurisdiction
under Section 6213(a) to enjoin the IRS's actions. In Kopas, 33 AFTR2d 74-884 (6th Cir. 1974), the court
denied injunctive relief when the taxpayer sought to enjoin a jeopardy assessment. In Walker,
333 F2d 768 (9th Cir 1964), the court ruled that the taxpayer could test the merits of an assessment by suing for a refund
and that he could not get injunctive relief. In McClure, 330 F2d 954, (6th Cir. 1964), the court denied the
individual's request for a temporary restraining order because he did not show extraordinary or exceptional circumstances
to warrant an exception to the ban on such suits that Section 7421 establishes. In Botta,
314 F2d (2d Cir. 1963), the court denied an injunction to corporate officers that were resisting the collection of unpaid
withholding taxes because the Supreme Court held in Williams Packing and Navigation Company. 370 US 1 (1962)
that an injunction will lie only where there is both an adequate remedy at law and a clear showing that the IRS cannot possibly
prevail.
In Fair 89-2 USTC (D. Colo 1989), the court dismissed a mandamus action and stated that the individual
had another available method to contest a statutory notice of deficiency. The proper way to contest a deficiency
is to petition the Tax Court or pay the deficiency and sue for a refund.
In Burns, 84-2 USTC (SD Fla. 1984), a suit to stop the collection by the IRS was dismissed under the
anti-injunction rule.
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Bankuptcy and the IRS LienBankruptcy and the IRS Lien If you
have a retirement fund that the IRS cannot take from you in bankruptcy court, it is still possible that the IRS will attempt
to claim that the taxes are secured by their lien on your exempt asset. Although, the IRS' lien may
survive bankruptcy as to the value of the exempt asset, the IRS should not be allowed to secure the tax that is otherwise
dischargeable. Be sure to fight back hard if the IRS argues that an exempt asset secures your taxes.
Although IRS levy powers typically include the right to levy on various categories of retirement and pension plans,
as a general rule IRS Collection activity policies discourage levy on social security, veteran's pension plans, benefits
under the GI Bill of Rights, disability benefits, and similar income.
The IRS ordinarily may not levy on the corpus of a pension fund if the employee does not have the right to access the
funds in a lump sum. (IRM 536(14.5)(1). And a levy may not attach to ERISA pension payments
until a taxpayer has a right to receive such payments:
For a levy to attach funds in a pension or retirement plan, the taxpayer must have an unqualified, unconditional right
to demand payment from the plan. The levy only attaches the taxpayer's present right. If
the taxpayer's only present right in the plan is a right to receive payments in the future, the Service is not presently
entitled to receive any amounts for the levy. (Rev. Rul 55-210 (1955-1). The IRS'
interest in a lien on exempt property is protected even if otherwise dischargeable taxes are determined to be discharged by
the Court. See In re Frengel, BR 115 569 and In re Zouhar, 10 BR 154. The
Court does not have to declare the tax is undischargeable to protect the government's interest.
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Saturday, February 24, 2007
IRS Wage Levy For over 25 years, I have been counseling people in IRS procedural issues. I specialize in wage levy removal. When the IRS sends you a notice of levy, do NOT ignore it. You will need to get an IRS levy release immediately. I can set you straight when it comes to IRS levy release help. My site, anti-irs.com, contains thousands of pages of levy information. If you have been hit with a wage levy, visit Anit-IRS first.
Check this blog often, I've had my ear to the ground for nearly three decades. I will
keep you updated on all the news concerning IRS activity, fraudsters and con artist schemes, and all the latest case law.
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