The Anti-Injunction Act

 

            Generally speaking, you cannot sue the government on tax issues because of the Anti-Injunction Act, IRC 7421.  There are some exceptions to the rule.  The courts have held that the purpose of the statute is to permit the collection and assessment of taxes and to permit the United States to get prompt collection of its revenue without judicial intervention.

 

            Internal Revenue Code Sections 6320 and 6330(d) allow the citizen to seek judicial remedy from IRS liens and levies.  A citizen who has exercised her rights to appeal under IRC 6320 and 6330 with respect to liens and levies now has specific authority to seek judicial review. 

 

            When the IRS issues a Statutory Notice of Deficiency, the citizen has 90 days to file a petition with the Tax Court.  Once the petition is filed, the IRS cannot assess and collect the tax until the issue has been litigated in the Tax Court.

Judicial Relief Against IRS Tyranny

 

            Internal Revenue Code Section 7433 provides that a taxpayer may sue the United States if a collection employee "recklessly or intentionally" violates the Internal Revenue code. (IRS 7334(a). 

 

            The Internal Revenue Service Restructuring and Reform Act of 1998 revised IRS Section 7433 to allow suits for negligent violation of the Internal Revenue Code in the collection of tax.  Before this amendment, it had been very difficult for citizens to prove that an IRS employee had intentionally or recklessly disregarded the Code.

 

            The Reform Act of 1998 permits up to $100,000 in civil damages caused by an officer or employee of the IRS who negligently disregards the provisions of the Code or Treasury regulations in connection with the collection of Federal tax.  The damages are $1 million if the disregard was willful or reckless.  The act also permits up to $1 million in civil damages caused by an officer or employee of the IRS who willfully or recklessly violates provisions of the Bankruptcy Code. IRC 7433 is intended to be an exclusive remedy for recovery of damages caused by improper collection activity by the Service.  Before suit, the plaintiff must exhaust administrative remedies.  The award of damages will also be reduced by any amount that the damages could have been mitigated by the plaintiff (IRC 1744(d)(2).  The taxpayer must file a Form 843 Claim in which he specifies the actual damages caused by the IRS' illegal actions.  The IRS has six months to consider the claim.  If the Service rejects the claim, the taxpayer then has a right to go to court.  The taxpayer may also go to court after six months if the IRS fails to answer.

 

            An action under this section of the code must be filed within two years of the date the cause of action arises.  If the court finds that the action is frivolous, Congress has provided sanctions.   IRC Section 6673(b) provides up to a $10,000 sanction if congress finds that the litigation is frivolous.