6334 - Annotations - Social Security Benfits

Home Services FAQ Site Map Contact Us

Articles by Alvin Brown
Tax Preparation
Offer In Compromise
State Offers in Compromise
IRS Tax Liens
IRS Tax Liens - continued
IRS Tax Liens - continued 2
Levy - continued
Audit Techniques Guide
Congressional Contacts
Criminal Investigation
D.O.J Criminal Tax Manual
Tax Litigation
Installment Agreements
Statute of Limitations
Frivolous Tax Argument
Interest Abatement
IRS Misconduct
IRS Abuses
Tax Fraud
Fraud Statutes
Tax Reform Legislation
Tax Shelters
Tax Court
Trust Fund Penalty
Innocent Spouse Relief
Important Links


Additional Information:


Actions & Restrictions on Levy
Serving & Releasing Levies
Jeopardy Levy
Bank Levies
Levy on Income
Levy in Special Cases
Automated Levy Programs
6331 Code and Regulations
6332 Code and Regulations
6333 Code and Regulations
6334 Code and Regulations
6335 Code and Regulations
6336 Code and Regulations
6337 Code and Regulations
6338 Code and Regulations
6339 Code and Regulations
6340 Code and Regulations
6341 Code and Regulations
6330 Code and Regulations
6331 Court Order
6331 Damages
6331 Debt
6331 Community Property
6331 Effective Levy
6331 Bankruptcy p1
6331 Bankruptcy p2
6331 Bankruptcy p3
6331 Bankruptcy p4
6331 Bankruptcy p5
6331 Bankruptcy p6
6331 Bail Money
6331 Bank Account
6331 Bank Vault
6331 Alimony Funds
6331 Continuous Levy
Publication 4418 - Levy Program
Pre Seizure Considerations Tax Levy
Pre Approval Post Approval
Actions Prior to sale of seized property
IRS Seizure Sale Procedures
How IRS Conducts a Seizure of  Property
Property acquired and disposed by IRS
Judicial Sale of Levied Property
Understanding your IRS Notice
Releasing Levies and Levied Property
7426 Code and Regulations
Amendment to section 6330 Regulations
6320 Proposed Amendments of Regulations
6332 - Seizure of Property Subject to Distraint
6332 - Annotations- Salary
6332 - Annotations- Savings Account Attachment
6332 - Annotations- Summary Judgment
6332 - Annotations- State Auditor
6332 - Annotations- State Funds
6332 - Annotations-Prior Law
6332 - Annotations- Surety
6332 - Annotations- Title in Dispute
6332 - Annotations- Attorney Fees
6332 - Annotations- Attorney's Liability
6332 - Annotations- Bank Accounts p1
6332 - Annotations- Bank Accounts p2
6332 - Annotations- Bank Accounts p3
6332 - Annotations- Bank Accounts p4
6332 - Annotations- Bank Accounts p5
6332 - Annotations- Commissions
6332 - Annotations- Corporations Obligations
6332 - Annotations- Effect of Honoring Levy p1
6332 - Annotations- Effect of Honoring Levy p2
6332 - Annotations- Effect of Honoring Levy p3
6332 - Annotations- Effect of Honoring Levy p4
6332 - Annotations- Effect of Honoring Levy p5
6332 - Annotations- Effect of payment of tax
6332 - Annotations- Embezzled Funds
6332 - Annotations- Partnership Property
6332 - Annotations- Levy and Demand
Property in Custody of County Commissioner
6332 - Annotations- Property of Another
6332 - Annotations- Property in Custody of State Court
6332 - Annotations- Reasonable Cause
6332 - Annotations- Property Unlawfully Obtained
6333 - Annotations- No Levy Pending
6334 - Annotations- Child Support
6334 - Annotations- Amount of Exemption
6334 - Annotations- Books Furniture tools
6334 - Annotations- Homestead p1
6334 - Annotations- Homestead p2
6334 - Annotations- Homestead p3
6334 - Annotations- Clothing
6334 - Annotations- Disability Benefits
6334 - Annotations- Retirement Accounts p1
6334 - Annotations- Retirement Accounts p2
6334 - Annotations- Military Retirement Benifits
6334 - Annotations- Net Pay
6334 - Annotations- State Exemption Law
6334 - Annotations- Seaman's Wage Statute
6334 - Annotations- Social Security Benfits
6334 - Annotations- Prior Law
6334 - Annotations- Subsequently Receieved Wages
6334 - Annotations- Worker's Compensation
6335 - Annotations- Designation of Proceeds
6335 - Annotations- Bailment Lessor
6335 - Annotations- Damage Suit Against Collector p1
6335 - Annotations- Damage Suit Against Collector p2
6335 - Annotations- Husband and Wife
6335 - Annotations- Effect of Vacating Invalid Sale
6335 - Annotations- Homesteads p1
6335 - Annotations- Homesteads p2
6335 - Annotations- Homesteads p3
6335 - Annotations- Jeopardy Assessments
6335 - Annotations- Injunctive Relief
6335 - Annotations- Interest
6335 - Annotations- Minimum Price
6335 - Annotations- Jurisdiction
6335 - Annotations- Late Payment
6335 - Annotations- Place of Sale
6335 - Annotations- Notice of Adjournment
6335 - Annotations- Notice of Sale or Seizure p1
6335 - Annotations- Notice of Sale or Seizure p2
6335 - Annotations- Notice of Sale or Seizure p3
6335 - Annotations- Notice of Sale or Seizure p4
6335 - Annotations- Third-Party Interest p1
6335 - Annotations- Third-Party Interest p2
6335 - Annotations- Rescission
6335 - Annotations Seized Property Sale Report
6335 - Annotations--Prior Law
6335 - Annotations- Wrongful Sale
6330 Collection Due Process Hearing Requests
6330 - Annotations- Collection Due Process Notice
6330 - Annotations- Forms and Transcripts 1 p1
6330 - Annotations- Forms and Transcripts 1 p2
6330 - Annotations- Forms and Transcripts 1 p3
6330 - Annotations- Froms and Transcripts 1 p4
6330 - Annotations- Forms and Transcripts 1 p5
6330 - Annotations- Froms and Transcripts 2
6330 - Annotations- Hearing Procedures 1 p1
6330 - Annotations- Hearing Procedures 1 p2
6330 - Annotations- Hearing Procedures 1 p3
6330 - Annotations- Hearing Procedures 1 p4
6330 - Annotations- Hearing Procedures 2 p1
6330 - Annotations- Hearing Procedures 2 p2
6330 - Annotations- Hearing Procedures 2 p3
6330 - Annotations- Hearing Procedures 2 p4
6330 - Annotations- Hearing Procedures 3 p1
6330 - Annotations- Hearing Procedures 3 p2
6330 - Annotations- Hearing Procedures 3 p3
6330 - Annotations- Hearing Procedures 3 p4
6330 - Annotations- Hearing Procedures 4 p1
6330 - Annotations- Hearing Procedures 4 p2
6330 - Annotations- Hearing Procedures 4 p3
6330 - Annotations- Hearing Procedures 4 p4
6330 - Annotations- Hearing Procedures 5 p1
6330 - Annotations- Hearing Procedures 5 p2
6330 - Annotations- Hearing Procedures 5 p3
6330 - Annotations- Hearing Procedures 6 p1
6330 - Annotations- Hearing Procedures 6 p2
6330 - Annotations- Hearing Procedures 6 p3
6330 - Annotations- Impartial IRS Appeals Officers p1
6330 - Annotations- Impartial IRS Appeals Officers p2
6330 - Annotations- Issues Raised at Hearings 1 p1
6330 - Annotations- Issues Raised at Hearings 1 p2
6330 - Annotations- Issues Raised at Hearings 1 p3
6330 - Annotations- Issues Raised at Hearings 1 p4
6330 - Annotations- Issues Raised at Hearings 2 p1
6330 - Annotations- Issues Raised at Hearings 2 p2
6330 - Annotations- Issues Raised at Hearings 2 p3
6330 - Annotations- Issues Raised at Hearings 2 p4
6330 - Annotations- Issues Raised at Hearings 2 p5
6330 - Annotations- Issues Raised at Hearings 3 p1
6330 - Annotations- Issues Raised at Hearings 3 p2
6330 - Annotations- Issues Raised at Hearings 3 p3
6330 - Annotations- Issues Raised at Hearings 3 p4
6330 - Annotations- Issues Raised at Hearings 4 p1
6330 - Annotations- Issues Raised at Hearings 4 p2
6330 - Annotations- Issues Raised at Hearings 4 p3
6330 - Annotations- Issues Raised at Hearings 4 p4
Judical Review of Apepeals- Equivalent
Judical Review of Apepeals-District Co (1)
Judicial Review of Appeals-District Court p1
Judicial Review of Appeals-District Court p2
Judicial Review of Appeals-District Court p3
Judicial Review of Appeals-District Court p4
Judical Review of Apepeals-Filed in Wrong
Judicial Review of Appeals-Judicial Rev (1)
Judicial Review of Appeals-Judicial Review p1
Judicial Review of Appeals-Judicial Review p2
Judicial Review of Appeals-Judicial Review p3
Judicial Review of Appeals-Judicial Review p4
Judicial Review of Appeals-Judicial Review p5
Judicial Review of Appeals-Sovereign Immunity
Judicial Review of Appeals-Statute of Limitations
Judicial Review of Appeals-Tax Court 1 p1
Judicial Review of Appeals-Tax Court 1 p2
Judicial Review of Appeals-Tax Court 1 p3
Judicial Review of Appeals-Tax Court 1 p4
Judicial Review of Appeals-Tax Court 1 p5
Judical Review of Apepeals-Tax Court 2 p1
Judicial Review of Appeals-Tax Court 2 p2
Judicial Review of Appeals-Tax Court 2 p3
Judicial Review of Appeals-Timely Filing
6330 - Annotations- Prior Hearings p1
6330 - Annotations- Prior Hearings p2
6336 - Annotations- Injunctive Relief
6336 - Annotations- Value of Property
6337 - Annotations- Assignee
6337 - Annotations- Attempt to Assign
6337 - Annotations- Bankruptcy
6337 - Annotations- Fraud Right of Redemption
6337 - Annotations- Jurisdiction
6337 - Annotations- Periods for Redemption
6337 - Annotations- Proper Party
6337 - Annotations- Property Subject to Redemption
6337 - Annotations- Reaquisition by Prior Owner
6337 - Annotations- Representations
6337 - Annotations- Informal Redemption
6339 - Annotations- Effect of Faulty Transfer
6339 - Annotations- Sale of Taxpayers Real Property p1
6339 - Annotations- Sale of Taxpayers Real Property p2
6340 - Annotations- Purchaser of Property


Annotations- Social Security Benfits

Back Next


6334 Annotations: Social Security Benefits- Levy



Property Exempt from Levy: Social Security Benefits


[97-1 USTC 50,254] George C. Leining, Plaintiff v. United States of America , Defendant

U.S. District Court, Dist. Conn., Civ. 3:96cv00992 (AVC), 12/30/96

[Code Sec. 6334 ]

Social security benefits: Garnishment by IRS: Exemption from levy.--The IRS could garnish an individual's social security benefits until his outstanding tax liabilities were paid in full. Thus, the individual's action for reimbursement of the social security benefits and for a judgment declaring that his future social security benefits were exempt from IRS collection was dismissed. Although Section 407(a) of the Social Security Act generally exempts social security benefits from levy, it is superseded by Code Sec. 6334 , which provides that such benefits are not exempt from levy.

[Code Sec. 7402 ]

Social security benefits: Wrongful taking by IRS: Damages: Federal Tort Claims Act.--An individual's action for damages arising from the IRS's garnishment of his social security benefits to satisfy his outstanding tax liabilities without due process of law was dismissed. The IRS, under the Federal Tort Claims Act, did not waive its sovereign immunity for claims arising in respect of the assessment or collection of any tax.

George C. Leining, 280 Hicks Ave., Meriden, Conn. 06450, pro se. David X. Sullivan, New Haven, Conn. 06508, Philip J. Berkowitz, Department of Justice, Washington, D.C. 20530, for defendant.


COVELLO, District Judge:

This is an action for reimbursement and for damages brought pursuant to the Social Security Act, 42 U.S.C. 407(a). The complaint seeks reimbursement of certain social security benefits garnished by the Internal Revenue Service ("IRS"), a judgment declaring the plaintiff's future social security benefits exempt from IRS collection, and "an award of money under 28 U.S.C. 1346(a)(2), an amount to be set by a trial jury, in order to give notice to [the defendant] that the courts will not tolerate this sort of abuse."

The defendant now moves to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)6 on the grounds that the complaint does not state a claim upon which relief can be granted. The issues presented are: 1) whether the IRS can levy upon the plaintiff's social security benefits until the plaintiff's outstanding federal income taxes, and assessed penalties, are paid; and 2) whether the doctrine of sovereign immunity bars the complaint insofar as it states an action for a tortious, unconstitutional taking of property by a federal revenue agent. For the reasons hereinafter set forth, the court grants the defendant's motion to dismiss.


As of June 1995, the plaintiff, George Leining, owed the IRS income taxes and civil penalties, assessed pursuant to Internal Revenue Code 6672, in excess of $100,000. On June 21, 1995 , an IRS officer, Linda Rheault, sent a notice of levy to the social security administration, garnishing the plaintiff's entire social security benefit for the month of September 1995. Thereafter, the IRS has taken, each month, approximately one half of the plaintiff's social security benefit.


A motion to dismiss pursuant to Fed. R. Civ. P 12(b)6 involves a determination as to whether the plaintiff has stated a claim upon which relief may be granted. Fischman v. Blue Cross Blue Shield, 755 F. Supp. 528 (D. Conn. 1990). The motion must be decided solely on the facts alleged. Goldman v. Beldon, 754 F.2d 1059, 1065 (2d Cir. 1985). In deciding a motion to dismiss, a court must assume all factual allegations in the complaint to be true and must draw reasonable references in favor of the non-moving party. Scheurer v. Rhodes, 416 U.S. 232, 236 (1974). Such motion should be granted only where no set of facts consistent with the allegations could be proven which would entitle the plaintiff to relief. Conely v. Gibson, 355 U.S. 41, 45 (1957). The issue is not whether the plaintiff will prevail, but whether he would have the opportunity to prove his claims. Id.


1. IRS Levy

The defendant first moves to dismiss the complaint on the grounds that the complaint does not state a claim upon which relief can be granted. Specifically, the defendant argues that IRS Code 6334(a) authorizes the defendant to garnish the plaintiff's monthly social security benefits until the defendant has paid his outstanding income taxes and the assessed penalties. The plaintiff responds that 42 U.S.C. 407(a) bars the defendant from imposing a levy upon the plaintiff's social security benefits.

The court agrees with the defendant. 42 U.S.C. 407(a) provides,

[t]he right of any person to any future payment under this subchapter [Federal old-Age, Survivors, And Disability Insurance Benefits] shall not be transferable or assignable, at law or in equity, and none of the monies paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.

However, 42 U.S.C. 407(b) provides that 407(a) may be modified by other provisions of law, so long as the modification is by "express reference to this section." IRS Code 6334(c) provides an express reference to 407(a), in that,

[n]otwithstanding any other law of the United States (including 207 1 of the Social Security Act), no property or rights to property shall be exempt from levy other than the property specifically made exempt by subsection (a).

IRS Code 6334(c) . Accordingly, social security benefits are subject to levy by the IRS. See also United States v. Cleveland [94-2 USTC 50,421 ], 1994 WL 411376 (N.D. Ill. 1994). The court, therefore, concludes that the defendant may garnish the plaintiff's monthly social security benefits until the plaintiff's outstanding federal income taxes, and assessed penalties, are paid.

2. Tax Collection and The Federal Tort Claims Act

The complaint alleges that, "the defendant's agent [took the] plaintiff's social security benefit ... without due process of law, and in violation of law ... [and accordingly, the plaintiff is entitled to] an award of money under 28 U.S.C. 1346(a)(1) 2 , in an amount to be set by a trial jury, in order to give notice to [the defendant] that the courts will not tolerate this sort of abuse." The defendant responds that, to the extent that the above allegation seeks damages for a tortious, unconstitutional taking of property by a federal revenue agent, the action is barred by the doctrine of sovereign immunity and specifically, the tax collection exception to the Federal Tort Claims Act.

The court concludes that the complaint can be read to seek damages for an alleged tortious, unconstitutional taking of property by a federal revenue agent. It is well settled, though, that the defendant cannot be sued absent a specific statutory waiver of sovereign immunity. Dalehite v. United States , 346 U.S. 15, 30 (1953). The defendant, under the Federal Tort Claims Act and 28 U.S.C. 1346(b), specifically has not waived its sovereign immunity for claims arising "in respect of the assessment of collection of any tax ..." 28 U.S.C. 2680(c) (the tax collection exception). See Akers v. United States [82-1 USTC 9234], 539 F. Supp. 831 (D. Conn. 1982) citing Dupont Forgan Inc. v. AT&T Co., 428 D. Supp. 1297, aff'd 578 F.2d 1367 (2d Cir. 1978) cert. denied, 439 U.S. 970 (1978). Accordingly, the court grants the defendant's motion to dismiss.


For the foregoing reasons, the defendant's motion to dismiss (document no. 10) is granted.


1 Section 207 of the Social Security Act has been codified and re-numbered as 42 U.S.C. 407.

2 28 U.S.C. 1346(a)(1) provides, The district courts shall have original jurisdiction, concurrent with the United States Court of Federal Claims, of: (1) Any civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws;



[97-1 USTC 50,128] Godfrey Lehman, Plaintiff v. Internal Revenue Service, Defendant

U.S. District Court, No. Dist. Calif., C 96-2381 FMS, 11/5/96

[Code Secs. 6331 , 6334 and 7421 ]

Jurisdiction: District Court: IRS levy: Social security benefits: Anti-Injunction Act: Likelihood of prevailing: Irreparable injury.--A tax protestor's suit seeking to enjoin the IRS from levying his social security benefits or, in the alternative, to limit the amount of the levy was barred by the Anti-Injunction Act; thus, the court lacked jurisdiction. The IRS was likely to prevail against the taxpayer's efforts to enjoin the levy because the taxpayer owed back taxes, the levy did not require judicial approval before it became effective, and levies are not limited to government employees. Also, it was not necessary to reduce the amount of the levy because the taxpayer had other sources of income. The taxpayer did not suffer irreparable injury because he presented insufficient evidence to show financial hardship and he had a remedy at law in that he could pay the assessed taxes and then sue for a refund.

Godfrey Lehman, 333 Kearny St., San Francisco, Calif. 94108-3219, pro se. Thomas F. Carlucci, 450 Golden Gate Ave., San Francisco, Calif. 94102, for defendant.


SMITH, District Judge:

In July 1996, plaintiff, a long-time tax protester, filed a pro se complaint, in forma pauperis, seeking to enjoin the Internal Revenue Service from levying his social security benefits. Plaintiff asserts that he owes no tax debt, and that even if he did, the government should collect no more than twenty-five percent of his social security checks because of the hardship he would face if more were collected. He also challenges the authority of the government to garnish his social security based on 26 U.S.C. 6331, asserting that the provision applies only to government employees.

The government claims that plaintiff presently owes over $100,000, for failure to timely pay his taxes between 1982 and 1993. As part of its effort to collect this tax liability, the IRS began levying plaintiff's social security benefits in October 1995, collecting approximately $1500 per month. In March 1996, the IRS mistakenly released the levy; the agency later corrected this error and continues to levy plaintiff's social security benefits. The government argues that the Court lacks subject matter jurisdiction over the case.

Plaintiff has failed to oppose the government's motion to dismiss. On October 2, 1996 , the Court ordered plaintiff to show cause why the Court should not consider the matter submitted and decide the motion on the papers filed by defendant to date. Plaintiff responded that he had not opposed defendant's motion because he refused to accept the Court's substitution of the IRS as a defendant in the case. The Court finds this explanation inadequate; the question of substitution was settled in July 1996. Because plaintiff is pro se, however, the Court will consider the arguments against dismissal presented in his response to the order to show cause.


I. Legal Standard

A motion brought under Federal Rule of Civil Procedure 12(b)(1) seeks dismissal of the plaintiff's complaint for lack of subject matter jurisdiction. "Unlike a Rule 12(b)(6) motion, a Rule 12(b)(1) motion can attack the substance of a complaint's jurisdictional allegations despite their formal sufficiency, and in so doing rely on affidavits or any other evidence properly before the court." St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989), cert. denied, 493 U.S. 993 (1989). Because federal courts are presumptively without jurisdiction in civil matters, the burden of proving the Court's authority to consider a case rests on the party asserting jurisdiction. Kokkonen v. Guardian Life Ins. Co. of America , 114 S. Ct. 1673, 1675 (1994).

II. Analysis

No person may bring a lawsuit against the United States unless the government has expressly consented by statute to be sued. United States v. Dalm [90-1 USTC 50,154; 90-1 USTC 60,012], 494 U.S. 596, 608 (1990). If the government has consented to be sued, a plaintiff must comply exactly with the terms of the statute giving such consent. United States v. Sherwood, 312 U.S. 584, 590 (1941). If the United States has not waived its sovereign immunity, courts lack the jurisdiction to entertain lawsuits against the government. Gilbert v. DaGrossa [85-2 USTC 9665], 756 F.2d 1455, 1458 (9th Cir. 1985).

The Anti-Injunction Act, 26 U.S.C. 7421, prohibits suits that seek to prevent the assessment or collection of taxes. A judicial exception to the Act, however, permits a taxpayer to sue the United States for injunctive relief if she can demonstrate that (1) the government cannot prevail on the merits, and (2) the taxpayer will suffer irreparable injury if injunctive relief is not granted. Enochs v. Williams Packing & Navigation Co., Inc. [62-2 USTC 9545], 370 U.S. 1, 6-8 (1962); Hughes v. United States [92-1 USTC 50,086], 953 F.2d 531, 535 (9th Cir. 1992).

Plaintiff's claim that he owes no tax debt does not meet these requirements. According to Internal Revenue Service ("IRS") records, plaintiff still owes the government over $100,000. (Declaration of John Borchelt ("Borchelt Decl.") Exhibit C.) The government is therefore likely to prevail against plaintiff's effort to enjoin any government collection of his social security benefits.

Contrary to plaintiff's assertions, the levy does not require judicial approval before it becomes effective. See United States v. Phillips [2 USTC 743], 283 U.S. 589, 593-594 (1931) (IRS authorized to use summary collection procedures such as a levy); Towne Antique Ford Foundation v. Internal Revenue Service [93-2 USTC 50,430], 999 F.2d 1387, 1394 (9th Cir. 1993) (pre-levy hearing not required). The levies are not limited to government employees, either. See Sims v. United States [59-1 USTC 9338], 359 U.S. 108, 112-13 (1959); Arford v. United States [92-1 USTC 50,229], 934 F.2d 229, 234 (9th Cir. 1991) (6331 applies to private sector employees as well as government workers).

Plaintiff is correct that the Internal Revenue Code exempts from levy an amount of money sufficient to support a taxpayer and her family. 26 U.S.C. 6331(a), 6334(d). The IRS appropriately determined that a reduction in the amount of the levy was unnecessary in plaintiff's case, however, because it determined that he has other sources of income. (Borchelt Decl. 7.) The government is therefore likely to prevail against plaintiff's effort to obtain a reduction in the levy on his social security benefits.

Even if plaintiff were able to show that the government could not prevail on the merits, he cannot meet the second prong of the Anti-Injunction Act test--irreparable injury. Plaintiff's evidence that he owes debts to several companies is not sufficient evidence to support a finding of financial hardship. The Court so advised plaintiff in July 1996, when it denied his motion for a preliminary injunction. Moreover, because plaintiff has a remedy at law, he cannot show irreparable injury; plaintiff may pay the assessed taxes and then sue for a refund under 28 U.S.C. 1346(a), after fulfilling certain administrative prerequisites.

Because plaintiff cannot overcome the requirements of the Anti-Injunction Act, the United States 's sovereign immunity prevents this Court from taking jurisdiction over his claim. Plaintiff's case therefore must be dismissed.


For the foregoing reasons, the Court GRANTS defendant's motion to dismiss. Based on the history of this case, the Court finds that any amendment would be futile; therefore, plaintiff's case is dismissed WITH PREJUDICE.



For the reasons stated in the accompanying order, this action is DISMISSED. The Clerk of the Court shall close the file.





[99-1 USTC 50,441] Arlie Chester Addington and Rena Sue Addington, Plaintiffs v. United States of America, U.S. Treasury Department, Internal Revenue Service and James Payton, individually, Defendants

U.S. District Court, So. Dist. W.Va., Charleston Div., Civ. 2:98-0376, 3/12/99 , 75 FSupp 2 d 520

[Code Secs. 6331 and 6334 ]

Liens and levies: Authority of IRS: Social security benefits.--Married taxpayers failed to substantiate their claim that an IRS levy against the husband's social security benefits violated any statute; the IRS is specifically authorized to seize social security benefits to collect unpaid taxes.

[Code Sec. 6871 ]

Bankruptcy: Discharge of tax debt: Failure to prove.--Married taxpayers offered no evidence that tax liabilities with respect to two tax years were discharged in bankruptcy. The discharge order did not specifically discharge the liabilities, and there was no evidence that the IRS intentionally violated any code section in sending balance due reminders.

[Code Sec. 7122 ]

Offers-in-compromise: Discretion of IRS to reject.--The IRS was entitled to reject married taxpayers' offer in compromise of their tax liability since it has discretion as to whether to accept such an offer.

[Code Secs. 7422 and 7433 ]

Suits by taxpayers: Wrongful collection: Failure to state claim for: Challenge to assessments: Refund claims: Failure to pay tax: Failure to file administrative claim.--Married taxpayers failed to state a claim for wrongful collection of tax in connection with the IRS's rejection of their offer in compromise and its levy on the husband's social security benefits. Although Code Sec. 7433 provides a limited waiver of sovereign immunity with respect to wrongful collection, the taxpayers essentially alleged wrongful assessment; thus, they were not entitled to circumvent the Code Sec. 7422 procedure of paying the assessment and bringing a timely administrative refund claim with the IRS prior to challenging their assessment.


Pending before the Court is the motion for summary judgment filed by Defendant United States of America . For the reasons set forth below, the defendant's motion for summary judgment is GRANTED.

I. Introduction

GOODWIN, District Judge:

Plaintiffs, Arlie Chester and Rena Sue Addington, filed this action against the United States of America, the Department of Treasury, the Internal Revenue Service and Revenue Officer James Payton pursuant to 26 U.S.C. 7433 for wrongful collection of taxes. Defendants IRS, Revenue Office Payton and the Department of the Treasury were dismissed as parties in July, 1998. In their complaint, plaintiffs claim that an officer or employee of the Internal Revenue Service intentionally or recklessly violated Internal Revenue Code provisions and policies in collecting taxes allegedly owed by the plaintiffs. Specifically, plaintiffs allege:

(1) that the IRS violated Code Section 7122 and "internal policy" in "refusing to consider" or "summarily rejecting" their offer in compromise. (compl., Introduction and 33.);

(2) that after they were unable to successfully compromise their tax liabilities, the IRS improperly levied on Mr. Addington's social security benefits. (Compl., 29.); and,

(3) that the IRS wrongfully sent them collection notices for the 1984 and 1985 income tax liabilities which had been discharged in bankruptcy. (Compl., 41 and 42.).

Plaintiffs seek an abatement and refund of tax, compensatory and punitive damages, attorney's fees and costs.

Defendants deny plaintiffs' allegations and contend that plaintiffs owe federal income taxes for several tax years.

The IRS assessed $145,886.06 in federal income taxes, penalties and interest for tax year 1986 against Plaintiff Arlie Addington on May 1, 1989 . This assessment was issued as a result of an embezzlement scheme for which Mr. Addington plead guilty to conspiracy charges. In 1994, Revenue Officer James Payton was assigned to collect the alleged delinquent taxes from plaintiffs for tax years, 1986, 1990, 1993 and 1994.

On April 18, 1995 , plaintiffs filed a voluntary Chapter 7 bankruptcy petition in this district's bankruptcy court. In July 1995, the bankruptcy court issued the discharge order in the Addington's bankruptcy case. The bankruptcy case was closed in June 1996.

In July 1996, plaintiffs provided Revenue Officer Payton with a collection information statement. Plaintiffs incorrectly believed this form to be an offer in compromise. After reviewing this form, Payton prepared an installment agreement and sent it to plaintiffs' attorney, Earnest Morton.

In late 1996, Payton began levying on Mr. Addington's social security benefits in order to collect a portion of the taxes owed. In June 1997, plaintiffs did submit an offer in compromise after which the IRS returned it to plaintiffs with a request to provide additional information.

In October 1997, the IRS sent balance due notices to Rena Sue Addington for tax years 1984 and 1985.

Plaintiffs contend in their complaint that they owe federal taxes for 1990 through and including 1994, but deny any liability for 1986. Plaintiffs claim that any alleged tax liability for 1984, 1985, and 1986 was discharged at the end of the bankruptcy case.

Plaintiffs filed this action on May 4, 1998 , alleging reckless conduct by the IRS in wrongful collection of federal income taxes. Defendants denied the allegations in their answer.

Pursuant to a scheduling order adopted by the Court, the defendant filed a summary judgment motion. All briefs now being submitted, this matter is ripe for decision.

II. Standard of Review

To obtain summary judgment, the moving party must show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). In considering a motion for summary judgment, the Court will not "weigh the evidence and determine the truth of the matter." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). Instead, the Court will draw any permissible inference from the underlying facts in the light most favorable to the nonmoving party. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986).

Although the Court will view all underlying facts and inferences in the light most favorable to the nonmoving party, the nonmoving party nonetheless must offer some "concrete evidence from which a reasonable juror could return a verdict in his [or her] favor." Anderson, 477 U.S. at 256. Summary judgment is appropriate when the nonmoving party has the burden of proof on an essential element of his or her case and does not make, after adequate time for discovery, a showing sufficient to establish that element. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The nonmoving party must satisfy this burden of proof by offering more than a mere "scintilla of evidence" in support of his or her position. Anderson, 477 U.S. at 252.

In support of its motion for summary judgment, defendant asserts that plaintiffs cannot litigate the correctness of their tax liability under the guise of a damage claim pursuant to 26 U.S.C. 7433 but must follow the specific statutory provisions for contesting one's tax liability. Defendants further assert that no IRS officer intentionally or recklessly violated any code provision during dealing with plaintiffs.

In opposition to the motion, plaintiffs contend genuine issues of fact exist, prohibiting entry of summary judgment for defendants.

III. Discussion

In this case, plaintiffs seem to suggest that the IRS's collection activity by its rejection of an offer to compromise and serving a levy on plaintiff Arlie Addington's social security benefits gives rise to a cause of action pursuant to 26 U.S.C. 7433 because the IRS was attempting to collect a liability for tax year 1986 which plaintiff's did not owe.

Section 7433 of Title 26 (U.S.C.) provides, in pertinent part, as follows:

(a) In General--If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly or intentionally disregards any provision of this title or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. Except as provided in section 7432, such civil action shall be the exclusive remedy for recovering damages resulting from such actions.

(emphasis added).

26 U.S.C. 7433 was enacted as part of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. No. 100-647, Sec. 6241(a), 102 State. 3342 (hereinafter "TAMRA"). Section 7433 is effective for actions taken by officers and employees of the Internal Revenue Service occurring after November 10, 1998 , in connection with the collection of taxes. TAMRA at Sec. 6240(c).

Section 7433 is a very limited waiver of the United States ' sovereign immunity. Like any other waiver of that sovereign immunity, it " 'must be strictly observed, *** and construed in favor of the sovereign.' " Gonsalves v. Internal Revenue Service [92-2 USTC 50,474], 975 F.2d 13, 15 (1st Cir. 1992). Indeed, "[c]ourts may not 'enlarge . . . beyond what the language [of the statute creating the waiver] requires.' " Id. at 16 (citing Eastern Transportation Co. v. United States, 272 U.S. 675 (1927)).

Section 7433 provides a civil remedy for violations of the Internal Revenue Code which occur in the course of collecting taxes. It is not a remedy for taxpayers alleging impropriety or errors in the tax assessment process. Miller v. United States [95-2 USTC 50,516], 66 F.3d 220, 222-223 (9th Cir. 1995) (Section 7433 does not extend to the erroneous or improper assessment of taxes), cert. denied, 116 S. Ct. 1317 (1996); Shaw v. United States [94-1 USTC 50,254], 20 F.3d 182, 184 (5th Cir.), cert denied, 115 S. Ct. 635 (1994). (based on plain language of Section 7433, a taxpayer cannot maintain an action under this statute for the improper assessment of taxes); see also White v. Commissioner, 899 F. Supp. 767, 772 (D. Mass. 1995).

Thus, in order to demonstrate a claim under Section 7433(a), a taxpayer must prove, by a preponderance of the evidence, that the IRS did not follow the "prescribed methods of acquiring assets." See Shaw v. United States [94-1 USTC 50,254], 20 F.3d at 184; see also Miller v. United States [95-2 USTC 50,516], 66 F.3d at 222. Stated another way, a Section 7433 plaintiff must demonstrate that some IRS official or employee intentionally or recklessly violated a specific section of the Internal Revenue Code or Treasury Regulations in collecting the taxes from the taxpayer. See 26 U.S.C. 7433(a); White v. Commissioner, 899 F. Supp. at 772.

In this case, plaintiffs suggest that the IRS's activity by its rejection of an offer in compromise and securing a levy gives rise to a cause of action pursuant to 7433 because the IRS was attempting to collect a liability which plaintiffs claim Mr. Addington does not owe. The IRS disputes Mr. Addington's claim that he owes no tax. In accordance with the principles enunciated in Miller, Shaw and Gonsalves, the court noted "[s]ection 7433 was not intended to supplement or supersede, or to allow taxpayers to circumvent" the requirements of 26 U.S.C. 7422, or any other section of the Internal Revenue Code.

Accordingly, the Court is of the opinion that plaintiffs' claim that the IRS wrongfully assessed 1986 taxes does not give rise to a valid Section 7433 claim for wrongful collection.

In their complaint, plaintiffs' also allege that the IRS acted in direct violation of IRS policy by unreasonably failing to submit their offer in compromise or refusing to consider their offer in compromise.

The only mechanism to compromise a tax before referral to the Department of Justice is pursuant 26 U.S.C. 7122. Botany Worsted Mills v. U.S. [1 USTC 348], 278 U.S. 282, 49 S. Ct. 129, 73 L. Ed. 379 (1929); Yarborough v. U.S. [56-1 USTC 9295], 230 F.2d 56 (4th Cir. 1956).

Section 7122 clearly states that the Secretary may compromise any civil or criminal tax case prior to referral to the Department of Justice. The decision to accept or reject a compromise offer is discretionary and cannot be compelled by any action. Carroll v. Internal Revenue Service [64-2 USTC 9687], 14 AFTR2d 5564 (E.D. N. Y. 1964).

Plaintiffs' complaint conveys the impression that plaintiffs submitted more than one offer in compromise. Yet the record, through the declarations of Revenue Office Payton, dictates only one was submitted to the IRS on July 1997. The declarations of Mr. Payton also illustrate that plaintiffs provided a financial/collection information statement to Officer Payton on July 1996 but no offer in compromise. At that time, Payton did determine the offer was inappropriate, prepared a proposed installment agreement, and sent it to plaintiffs' lawyer, Mr. Morton. At that time, plaintiffs never did sign it nor did they submit an offer in compromise. Having received nothing from plaintiffs in late 1996, the IRS then levied on Mr. Addington's social security benefits. Not until June 1997 did plaintiffs submit an offer in compromise to the IRS, Form 656.

By letter of July 30, 1997 , the form was returned to plaintiffs by the IRS and a request was made for further information. The Court believes it is clear that the IRS did not summarily reject this offer but did request resubmission of an offer on forms sent to plaintiffs in that July 1997 letter. Since compromising tax liabilities is purely discretionary, even if the IRS had summarily rejected plaintiffs' offer, it would not give rise to a claim for intentional or reckless violation of the Code.

Plaintiffs further contend that the revenue officer intentionally or recklessly violated some Code provision when he served a levy to collect Mr. Addington's social security benefits. Plaintiffs do not allege violations of specific Code sections but merely complain of IRS notices of intent to levy for years 1990, 1992 and 1986.

The Internal Revenue Code provides for two ways to enforce collection of unpaid taxes. The first method permits the U.S.A. to initiate a plenary judicial proceeding pursuant to Section 7403 of the Code to foreclose a tax lien on property in which the taxpayer has a right, title or interest. The second method under the Code for enforcing collection of unpaid taxes is by seizure pursuant to levy under Section 6331. United States v. National Bank of Commerce [85-2 USTC 9482], 472 U.S. 713, at 720-21 (1985); accord Resolution Trust Corp. v. Gill [92-1 USTC 50,199], 960 F.2d 336, 340 (3d Cir. 1991).

Plaintiffs have failed to cite any specific Code provision or regulation which Mr. Payton intentionally or recklessly violated in serving the levy to collect taxes. In fact, the Internal Revenue Code specifically authorizes a levy to collect taxes. 26 U.S.C. 6331(a). Upon review of Mr. Payton's declarations, Mr. Payton's actions in seeking to collect unpaid taxes were in observance of the Code, not a violation of it. Indeed, it is the duty of the IRS to collect taxes and to investigate possible defalcations of taxpayers in reporting and paying taxes. Chamberlain v. Kurtz [79-1 USTC 9211], 589 F.2d 827, 835 (5th Cir. 1979). Since Mr. Payton was simply collecting taxes pursuant to methods prescribed by the Code, the Court believes that plaintiffs have no cause of action pursuant to Section 7433 for the levy on Mr. Addington's social security benefits.

Similarly, plaintiffs admit that they owed income taxes for tax years 1990 and 1992. (Compl, 32.) Despite this admission, they surprisingly complain that an IRS office sent them notices of intent to levy concerning these years. (Compl. 45-46.) The IRS is clearly authorized to issue notices of intent to levy pursuant to 26 U.S.C. 6331(a). Plaintiffs have no wrongful collection cause of action for receiving notices of intent to levy which, pursuant to I.R.C. 6331(a), they are supposed to receive. The Court believes this allegation is without merit.

Plaintiffs finally allege that in October 1997, the IRS sent Mrs. Addington balance due notices for 1984 and 1985 income tax liabilities. (Compl., 41.) They claim that these tax liabilities were discharged in their bankruptcy case.

Upon review of the extensive exhibits submitted by plaintiffs in opposition to the summary judgment motion, plaintiffs have offered no evidence that these liabilities were in fact discharged in their bankruptcy case. On July 24, 1995 , the Bankruptcy Court issued a discharge order in the Addington's bankruptcy case, and on July 31, 1995 , it issued an amended discharge order. On June 11, 1996 , the Bankruptcy Court issued a final decree in the Addington's bankruptcy case and closed the case. However, the discharge order did not specifically discharge the 1984 and 1985 tax liabilities. The amended discharge order provides that the debtors are released from "all dischargeable debts", including those "debts dischargeable under 11 U.S.C. 523". (Clarke Decl., Def. Mtn. for Summ. Judg., Ex. 3.)

Following these general principles of bankruptcy, in this case, Mrs. Addington's 1984 and 1985 income tax liabilities would have been considered discharged debts in the bankruptcy proceeding, unless they were excepted from discharge pursuant to 11 U.S.C. 523(a)(1)(A)--(C). Bankruptcy Rule 7001 defines the scope of rules governing adversary proceedings in bankruptcy cases and specifically provides that a complaint to determine dischargeability (item (6) is an adversary proceeding. The Addingtons did not file a complaint to determine dischargeability of their debts in their Chapter 7 case. Accordingly, when the Addingtons received their discharge, it was not clear whether their 1984 and 1985 tax liabilities were, in fact, discharged. Even with questions arising over their dischargeability, it is clear that the plaintiffs possess no evidence that the IRS intentionally or recklessly violated some Code provision or regulation in sending the balance due reminders.

The Court notes that defendant's primary contention in its motion for summary judgment centers around the fact that plaintiffs' complaint is merely an action challenging the assessment of taxes. This Court agrees with defendant's argument. The Court believes this plaintiffs' action is merely a complaint challenging the assessment of taxes. Accordingly, in order to challenge an assessment of taxes, jurisdictional prerequisite must be met in order for this Court to exercise jurisdiction. The taxpayer must first fully pay the tax assessment, including interest and penalties, and then timely file a claim for refund with the IRS. See 26 U.S.C. 7422(a); Flora v. U.S. [58-2 USTC 9606], 357 U.S. 63, 68 (1958), aff'd on reh'g [60-1 USTC 9347], 362 U.S. 145 (1960).

In order to timely bring a suit for a tax refund under 28 U.S.C. 1345(a)(1) and 26 U.S.C. 7422(a), the taxpayer must, in addition to complying with the full payment rule set forth in Flora, supra, timely file an administrative claim for refund with the IRS. United States v. Dalm [90-1 USTC 50,154; 90-1 USTC 60,012], 494 U.S. 596, 601-602 (1990). In order to file a timely claim for refund of taxes paid or collected, the taxpayer must file with the IRS a claim for refund within three (3) years from the date the original tax return was filed, or within two (2) years from the time the tax was paid, whichever period is later. 26 U.S.C. 6511(a); United States v. Dalm [90-1 USTC 50,154; 90-1 USTC 60,012], 110 S. Ct. at 1368; accord Miller v. United States [91-2 USTC 60,092], 949 F.2d 708, 711 (4th Cir. 1991); Yuen v. United States [87-2 USTC 9483], 825. F.2d 244, 245 (9th Cir. 1987)).

In this case, plaintiffs claim that the IRS erroneously assessed an income tax liability for tax year 1986 against Mr. Addington. (Compl., 7-18.) Plaintiffs' request that the IRS's claim for these taxes "be abated" and the money received pursuant to the IRS's levy on his social security benefits be returned to him. (Compl., Prayer for Relief.) However, plaintiffs have failed to allege that they (1) fully paid the tax liabilities, including interest and penalties, as required by Flora and its progeny, and (2) timely filed an administrative claim for refund with the IRS. 26 U.S.C. 7422(a).

In light of the above, plaintiffs' claims for tax abatement or the return of money received pursuant to a tax levy must fail.

Lastly, the Court is of the opinion that the claim of plaintiffs for damages for intentional or reckless violations of the Code by the IRS collecting taxes through balance due notices sent to Mrs. Addington does not amount to a viable claim under 7433. Upon review of the record, the Court finds that Mrs. Addington did not file tax returns for 1984 and 1985 and that the IRS properly sent notices to her within the required statutory period. 26 U.S.C. 6502(a).

Accordingly, there being no genuine issue of material fact and for the reasons set forth hereinabove, the Court finds that the U. S. is entitled to judgment as a matter of law with respect to plaintiffs' claims as alleged in their complaint. The Court GRANTS the defendant's motion for summary judgment and ORDERS that judgment be entered in favor of the defendant and that plaintiffs' action be Dismissed and Stricken from the docket of the Court.

The Clerk is directed to mail copies of this Memorandum Opinion and Order to counsel of record herein.


Home ] Services ] FAQ ] Site Map ] Contact Us ]

Presented by Alvin Brown and Associates, tax attorney, formerly with the Office of the Chief Counsel of the IRS. 
Call us for all IRS tax issues, problems and emergencies
Protect yourself from IRS intimidation, errors, and penalties.
www.irstaxattorney.com - ab@irstaxattorney.com - (888) 712-7690 - (703) 425-1400