Can I Sue the IRS for Improperly Seizing My Property?

If you’ve had property seized by the IRS, you may be wondering if you have any recourse if you think it was done improperly. Maybe you’ve received notices about a levy (when the IRS takes your property to satisfy a tax debt), and now you’re questioning whether it was done legally. The good news is that if you believe the IRS made a mistake, there are ways to fight back. Let’s break down what you can do if you think you were wrongfully levied.

What is a tax levy?

Before we get into how to challenge a levy, let’s quickly review what a tax levy is. A tax levy is when the IRS takes your property or assets to satisfy unpaid taxes. They might seize things like:

• Bank accounts (the IRS can take money directly from your account)
• Wages (they can garnish your paycheck)
• Personal property (like vehicles or even your home in extreme cases)

The IRS doesn’t just take action overnight. Before a levy happens, they will send multiple notices, and you typically have a chance to address the situation or dispute it before the levy occurs.

Can I sue the IRS if my property was wrongfully seized?

Yes, it is possible to sue the IRS if you believe your property was wrongfully seized but there are some important things you need to know first.

In general, the IRS has a legal right to levy your property if you owe taxes and haven’t made arrangements to pay. However, if they don’t follow the proper process or make mistakes along the way, they could be acting illegally. If that happens, you can take steps to challenge the levy.

What are the common reasons for a wrongful levy?

There are a few situations where the IRS could have made an error in levying your property:

1. Improper Notice. The IRS must send you specific notices and give you the chance to resolve the issue before levying your property. If they didn’t give you the required notice (like the Final Notice of Intent to Levy), the levy may not be valid.
2. Exempt property. Certain assets, like basic household goods or a portion of your wages, are protected from levy under the law. If the IRS seized property that was exempt, it could be considered wrongful.
3. Payment agreements or disputes. If you had already entered into a payment arrangement or were in the middle of a tax dispute, the IRS should not levy your property. If they did anyway, that could be a violation.
4. Mistakes in the process. Sometimes, the IRS makes administrative mistakes like miscalculating the amount owed, failing to properly release a lien, or taking action when the statute of limitations has expired.

What are my options if I believe thr IRS wrongfully levied my property?

If you believe that the IRS wrongfully seized your property, you have a few different ways to challenge it. Here’s what you can do:

1. Request a Collection Due Process Hearing
   Once your property is levied, the IRS is required to offer you a Collection Due Process (CDP) hearing. This is your opportunity to dispute the levy. You can request this hearing if you think the levy was improper or if you want to propose an alternative solution (like setting up a payment plan or settling the debt).
   You must request the CDP hearing within 30 days of receiving the Final Notice of Intent to Levy. If you miss the deadline, you lose the right to the hearing.
2. File a claim for wrongful levy
   If the IRS levied your property incorrectly, you can file a claim for wrongful levy with the IRS. If the IRS finds that the levy was indeed wrongful, they will return your property and may refund any money that was improperly taken. You’ll also want to ask the IRS to release the levy immediately.
3. Sue the IRS in Federal Court
   If you’ve exhausted the above options and still believe the IRS wrongfully seized your property, you may have the option to file a lawsuit in federal court. This should generally be a last resort, as it’s a complex process and can be expensive. The court will review whether the IRS acted within its legal authority.

Before you consider suing the IRS, it’s important to know that the IRS is protected by a principle called sovereign immunity, which limits how and when you can sue them. But there are exceptions, especially if the IRS did not follow the law.

What happens after the levy is released?

If the IRS agrees that the levy was wrongful and releases your property, they may refund any funds that were wrongly taken. If it’s a property seizure, the IRS may return the property or provide compensation.

However, it’s important to note that even if the levy is wrongful, the IRS still expects the tax debt to be paid. You will still need to resolve the underlying issue, whether it’s through a payment plan, settlement, or other methods.

Final Thoughts

Can you sue the IRS for wrongful levy? Yes, you can sue the IRS for improperly seizing your property, but the process isn’t easy. The IRS is a powerful institution with specific rules and protections in place. If you think the IRS wrongfully levied your property, your first step is to request a Collection Due Process hearing. If that doesn’t resolve the issue, you can file a claim for wrongful levy. If necessary, you can pursue a lawsuit in federal court.

If you’re facing a levy or feel the IRS made a mistake, don’t wait! Take action quickly. The longer you wait, the more complicated the situation may become.