The Tax Cuts and Jobs Act (TCJA) has given individuals and businesses an additional 15 months to file an administrative claim or bring civil action for wrongful levy or seizure against the IRS.
A levy by the IRS allows the agency to legally seize and sell property -- including wages, funds in bank or other financial accounts, vehicles, real estate and other personal assets -- to satisfy a tax debt. The law extends the time limit for filing a claim or lawsuit from nine months to two years.
According to an IRS statement, if an administrative claim for return of the property is made within the two-year period, the two-year period for bringing suit is extended for 12 months from the date of filing of the claim or for six months from the disallowance of the claim, whichever is shorter. The change in law applies to levies made after Dec. 22, 2017, and on or before that date, if the previous nine-month period hadn’t yet expired.
The time limits kick in when the IRS already sold the property it had levied. There is no time limit for the administrative claim if the agency still has the property.
Taxpayers can’t file a wrongful-levy claim or lawsuit because the law only applies to those other than the taxpayer. What’s that mean? According to the IRS, wrongful levy claims involve situations where a person or business maintains that the property either belongs to them or that they have a superior claim to it that the IRS isn’t recognizing.
If anyone receives a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing,” the IRS recommends an immediate call to the agency so that arrangements can be made to pay what’s owed. Of course, that means the IRS then won’t go ahead with the levy.
The IRS also recommends that anyone who gets a levy for their employees, vendors, customers or other third parties complies with the levy. Not doing that could mean that the recipient of the levy could face personal liability.
If the agency determines it has wrongly levied property, it will return one of the following: the property, an amount of money equal to the amount of money levied or an amount of money equal to the money received from the property sale.
To file an administrative wrongful levy claim, write the IRS Advisory Group for the area where the levy was made. Advisory Group offices can be found in Publication 4235.
Publication 4528 offers additional information on wrongful levy claims, including what information should be included in the letter to the IRS.
If a wrongful levy claim is denied, an appeal can be filed through the IRS’s Collection Appeals Program. Information is available in Publication 1660.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.