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Taxpayers Should Exercise Their Rights in IRS DisputesBy Peter C. Pappas, J.D., CPATo collect a debt, private creditors generally must file suit against the debtorin a court of appropriate jurisdiction. Thus, a private creditor must prove itscase in a court of law in order to get a court judgment allowing it to collectpayment from a debtor.Conversely, the Internal Revenue Service is not required to obtain a courtjudgment before it can begin collecting a debt.It is the power of the IRS to seize a taxpayer's assets without a court order,more than any other single factor, that has created the public's palpable fear ofthe IRS. In 1934, the Supreme Court gave the following rationale for allowing the IRSgreater powers of collection than those afforded private creditors:"Taxes are the lifeblood of the government, and their prompt and certainavailability an imperious need. ..., therefore, the (government) has resorted tomore drastic means of collection (than an action at law for the amount due). Theassessment is given the full force of a judgment, and if the amount assessed isnot paid when due, administrative officials may seize the debtor's property tosatisfy the debt."Mercifully, the courts also have ruled that the due process clause of theConstitution requires that the IRS do certain things before it can begin seizing ataxpayer's assets. First, the IRS can only begin enforced collection after it legally places a lienon a taxpayer's assets. The IRS generally cannot place a federal tax lien on ataxpayer's property until the following occurs:1. Assessment: The IRS makes an assessment against the taxpayer. 2. Notice and demand: The IRS notifies the taxpayer in writing about the natureand amount of the assessment, demanding the taxpayer pay the amount due. Actualnotice is not necessary. The IRS is only required to send the notice to thetaxpayer's last known address. If it does so and the taxpayer fails to pay theamount due, the notice requirement is met and the IRS can place a lien on, andbegin seizing, the taxpayer's assets. 3. Failure to pay: The taxpayer neglects or refuses to pay the amount demanded. Whenever a lien has been placed on a taxpayer's assets, or his or her bank accounthas been levied, wages garnisheed, or assets seized, a review should be made todetermine whether the IRS met the above conditions prior to taking such enforcedcollection action. Once the IRS places a valid federal tax lien on a taxpayer's property, itgenerally can begin seizing a taxpayer's property. What constitutes the propertyof a taxpayer is determined by state, and not federal, law. Therefore, because the IRS can only seize the property of the indebted taxpayer,it is precluded in Florida from seizing property owned jointly by a husband andwife for the tax debts of just one of them. In other words, because Floridaprovides that property owned jointly by a husband and wife is not the property ofeither the husband or the wife alone, but both of them together, the IRS is
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