Tax Denier Gets $350 in Damages for Wrongful Levy

[LPC]

Briefly, the court found that the IRS was negligent in not properly addressing a notice of intent to levy, but that the taxpayer suffered from no damages other than the $350 filing fee for the action under IRS section 7433.

Laurie L. Music v. United States, No. 2:12-v-00220-WCO (N.D. Georgia 4/17/2014).

Peter Reilly's write-up is here.

Full text of the court's order is here.

[tracer]

Surely a "win" every bit as big as U.S. v. Lloyd R. Long....

[LPC]

I never pointed out why I referred to the plaintiff as a tax denier.

From the court's decision:

Plaintiff, a former school teacher, last filed a tax return approximately fifteen years ago. At the time, she lived in Summerfield, Florida, and her tax return listed her address as Summerfield, Florida. Accordingly, the IRS considered plaintiff’s last known address to be Summerfield, Florida.

Sometime around 1998, plaintiff moved from Florida to Blue Ridge, Georgia and began working as a school teacher for the Cherokee County School Board. When plaintiff moved from Florida to Georgia, she did not leave a forwarding address with the Postal Service, and she did not inform the IRS that she had moved. She did not file a federal income tax return for the years 1999-2005.

Plaintiff’s continued abstention from filing income tax returns piqued the IRS’ interest. Sometime in August, 2005, the IRS sent a letter to plaintiff’s Summerfield address stating that the IRS had no record of receiving her tax returns for the 2001-2003 tax years. Sensibly, the IRS sent the letter to Summerfield, Florida, because that was plaintiff’s last known address. The IRS did not receive a response to its inquiry, so the IRS searched for an alternate address to send a follow-up letter. Plaintiff’s W-2 listed an address in Blue Ridge, Georgia, and the IRS used that address for a follow-up letter dated September 3, 2005. (Pl.’s Ex. 2 at 12). [color-red]Plaintiff received the Blue Ridge letter and responded that she was not required to file a tax return; under her (extremely flawed) reading of the tax code, she did not have any income.[/color] (Id. at 14). She also claimed that she had not received any letters from the IRS other than the letter dated September 3, 2005. (Id.).

In late 2005, plaintiff moved from Blue Ridge, Georgia to Epworth, Georgia. She did not leave a forwarding address with the Post Office, and she did not inform the IRS that she moved.

In March 2007, plaintiff was again subject to IRS scrutiny after she claimed that she was completely exempt from withholding. By letter dated March 1, 2007, IRS Compliance Services informed plaintiff’s employer that she was not entitled to complete exemption from withholding. (Id. at 15). On March 18, 2007, plaintiff sent a letter demanding that the IRS honor the Form W-4 she gave to her employer. (Id. at 18). The letter was sent from her Epworth address. The IRS sent a response to plaintiff’s Summerfield address; less than two weeks later, the letter was returned undelivered. On June 21, 2007, the IRS readdressed the letter to plaintiff’s Epworth address. (Id. at 19-20). Plaintiff received the letter and sent a response bearing her Epworth address. (Id. at 23). On July 27, 2007, the IRS sent a reply to plaintiff’s response at her Epworth address. (Id. at 24).

After plaintiff failed to file income tax returns for the 2004-06 tax years, the IRS sent plaintiff a notice of deficiency to her Summerfield address. Plaintiff did not challenge the notice of deficiency. Subsequently, the IRS sent a notice and demand for payment to plaintiff’s Summerfield address. Plaintiff did not respond. The IRS followed up by sending notice of intent to levy on June 7, 2010 and September 3, 2010, both of which were sent to plaintiff’s Summerfield address. (See Def.’s Ex. 1-2). When plaintiff failed to respond to these notices, the IRS issued a notice of levy to plaintiff’s employer on November 1, 2010. (Pl.’s Ex. 4 at 1).

The levy reduced her pay to $ 779.17. She quit her job the day after she received her levied paycheck. Plaintiff claims that this diminution in her paycheck forced her to quit her job because her net income was insufficient to pay the costs of commuting to and from work in addition to her living expenses. Plaintiff did not contact the IRS before she quit her job. Plaintiff did not attempt to get another job after she left her position with her last employer.