Levy time!

[scottinalaska]

Got some tough news from my wife’s boss(school district office).
They just received a letter titled, "Notice of Levy on Wages, Salary, and other Income." Form 668-W(c)
One year ago, the IRS told the Office that she could no longer claim ANY deductions, so for the past year, her accounting lady has sent away 30% of her paycheck to the IRS.
The usual routine when I talk to the Accounting Lady – “Bother me not with the law, I do what the IRS says.” My wife would rather not make waves, so I considered it peace at home with a cost and left it alone.
But now I am at the crossroads. I am ready to bring in a big gun who will have attorney letterhead informing the Accounting lady that Notices are only that – Notices. And whatever else verbage would be necessary to effect change.
Since this will now involve 10+K worth of levy, my wife will likely allow me to go in a bit more aggressive. She is handling it well as our finances are shaping up and of course considering figuring out how to begin sending it all in.

Now the question. Should I pursue this kind of service with an attorney since they won't listen to me? They have given us 3 working days to respond.
I'd like to lay it out real simple like:
Listen. You receive a notice, only a notice, and decide you need to mail money from my wife;s pay to the notice's sender. Is there a judge's signature there? Is there a court order there? No on both accounts. The IRS is not above the law. It is illegal to steal and the IRS knows it. But it is not illegal to ask or request strongly that someone else steal for them and mail it to them.
Thus, if you mail a dollar more to them, you are stealing and I will sue you directly. NOT the district. YOU. I am notarizing this conversation so that it will preserve success when I file my complaint in the local court on the theft you are committing.
{At this point, she probably contemplates suing me for being a meanie)

PS: some interesting snippets from the form:
“WE figured the interest and late payment penalty…”
“Statement of Exemptions and Filing Status (to be completed by TAXPAYER…)”
"This levy[this is a NOTICE of levy] requires the person who received it to turn over to us: (1) your wages and salary that have been earned but not paid yet..."
"If you decide to pay the amount you owe now, please bring a guaranteed payment to the nearest IRS office with this form, so we can tell the person who recieved this levy not to send us your money." [at least they admit whose money it is!]
“A levy was served on the person named on the front of this form.” [I have requested that “levy” be faxed to me from the lady]
“If you don’t give the completed statement to your employer, then your exempt amount will be figured as if your filing status is married filing separate with only one exemption” [this sounds like nothing will change! And I certainly don’t want to sign and confess!]

boy when it rains it pours!!
scottinalaska

[Livefire]

Scott,

This case may help your point........

JUSTICE COURT
BOULDER TOWNSHIP

PEGGIE and BILL WILLIAMSON CASE NO. 97AOI7
Plaintiffs,

v.

BOULDER DAM CREDIT UNION and
"BILL' WILLIAM G. FERENCE,
Defendants.

DECISION

Plaintiffs brought suit against the BOULDER DAM CREDIT UNION (hereafter "Credit Union') for inappropriately turning over money in Plaintiffs' credit union accounts to the Internal Revenue Service (IRS) without court order, without legal obligation and without Plaintiffs' permission. No evidence was presented to show that Defendant Ference was in any way personally involved in this action and consequently he is dismissed in his individual capacity from this action.

Plaintiffs had entrusted their funds to the BOULDER DAM CREDIT UNION, a financial institute licensed under the laws of the State of Nevada. As such, the Credit Union had a fiduciary relationship with the Plaintiffs and a resulting higher, fiduciary, responsibility over the funds they with which they have been entrusted.

Notwithstanding this fiduciary duty, when served with a 'notice of levy' from the IRS. the Credit Union sent the funds in the Plaintiffs' accounts to the IRS. This was done even though the Plaintiffs had objected to the procedures followed by the IRS and did so via sworn affidavit delivered to the Credit Union.

No evidence was presented that the Credit Union did anything to investigate the concerns of its depositors other than waiting twenty-one days to send the money. However, the Plaintiffs' concerns as presented to the Credit Union merited investigation and research.*

The Credit Union did not necessarily need to make a dispositive decision as to the merits of Plaintiffs' objections but the Credit Union should not have released the Plaintiffs' funds without considering their depositor's objections and as a result of that investigation possibly even inter-pleading the funds if necessary to protect itself from the competing claims for the Plaintiffs' funds.

At any rate, the Credit Union owed it's highest duty to it's depositors with whom it has a contractual and fiduciary duty. In the instant situation, the BOULDER DAM CREDIT UNION breached that duty, to the injury of the Plaintiffs. This injury included loss of $289.04 and $577.89 (total $ 866.93) taken from Plaintiffs' accounts together with return check fees and late fees of $243.94.

The Credit Union's claim of immunity is misplaced. Per statute (26 U.S.C. section 6332 (e)) and case law cited by Defendant, a bank is provided immunity if it honors an IRS levy. However, in the instant case the Credit Union was merely sent a "Notice of Levy"; consequently. the law providing for immunity when releasing funds pursuant to a "Levy" is not applicable.

Therefore, the Plaintiffs are awarded judgment against the Defendant Boulder Dam Credit Union in the amount of $1,110 87 plus court costs incurred and prejudgment interest.

DATED this 19th day of May. 1998





*The Plaintiffs argue that the mere sending of a "Notice of Levy" is inadequate for the seizure of funds by the IRS pursuant to the Internal Revenue Code and Case law. In Goodwin v. The United States, 935 F.2d.1061 (9th Cir. 1991) our Circuit Court of Appeals held that the IRS must strictly comply with the statutory requirements when seizing a taxpayers property. At page 1065 the court stated:

Congress has set forth precise requirements for notice of seizure and sale of property in tax deficiency situations. "[W]hen the government seeks to enforce the laws, it must follow the steps which congress has specified." Recce, 506 F.2d at 971.

A mere notice of intent to levy does not meet this requirement. In Freeman v. Mayer, 152 F.Supp. 383. at 385 (D.C., N.J. 1957) the court stated:

The procedure of accomplishing a levy maybe spelled out from the reported cases. A 'levy' requires that property be brought into legal custody through seizure, actual or constructive, levy being an absolute appropriation in law of the property levied on, and mere Notice of Intent to Levy is insufficient, United States v. O'Dell. 6th Cir.,(1947),160 F.2d. 304, 307. Accord, In re Holdsworth, D.C., N.J. 1953, 113 F. Supp. 878, 888; United States v. Aetna Life Insurance Company of Hartford Conn., D. C. Conn., 1942, 146 F.Supp. 30, 37, in which Judge Hincks observed that he could "find no statue which says that a mere notice shall constitute a levy." There are cases, which hold a warrant for distraint is necessary to constitute a levy. Givan v. Cripe, 7th Cir., 1951, 187 F.2d.. 225; United States v. O'Dell, supra. The Court of Appeals for Third Circuit stated in its opinion, 221 F.2d.at page 642, "These sections (26 U.S.C. sections 3690-3697) require that a levy by a deputy collector be accompanied by warrants of distraint." In re Brokol Manufacturing Co., supra. [Emphasis added.]

Similarly, the court in U.S. v. O'Dell. 160 F. 2d., 304, at 307 (6th Cir 1947) stated on this issue:

This paragraph describes a mere statement or Notice of Claim. Nothing alleged to have been done amounts to a levy, which requires that the property be brought into a legal custody through seizure, actual, constructive, levy being "an absolute appropriation in law of the property levied upon." Rio Grand R. Co. v Gomila, 132 U.S. 478, 10 S.Ct. 155, 33 L.Ed. 400; In re Weinger, Bergman and Co., D.C. 126 F. 875, 877; Smith v. Packard 7th Cir., 98 F. 793. Levy in not effected by mere notice. Hollister v. Goodale, 8 Conn. 332, 21 Am. Dec. 674; Meyer v. Missouri Glass Co., 65 Ark. 286, 45 S.W. 1062, 67 AM. St. Rep. 927; Jones v. Howard, 99 Ga. 451, 27 S.E. 765, 59 Am.St Rep. 231.

[Livefire]

part 2.

Section 3692 does not prescribe any procedure for accomplishing a levy upon a bank account. The method followed in the cases is that the issuing warrants of distraint, making the bank a party and serving with the Notice of Levy copy of the warrants of distraint and notice of lien.. Cf. Commonwealth Bank v. United States. 6th Cir., 115 F.2d., 327; United States v. Bank of the United States, D. C., 5 F.Supp. 942, 944. No warrants of distraint were issued here.

The cases relied on by the government as supporting recovery under section 3710 arise in the main out of situations where a bank has been sued, or joined as a party to an action claiming a bank deposit. No such procedure was followed in this case. Moreover, it does not appear that notice and demand were served upon the person liable to pay the taxes, mainly, the Howie Company., in accordance with sections 3670 and 3690. This being the case, query, whether the property or rights to property were within the meaning of section 3710 "subject to distraint," for under section 3690 the right to collect the taxes by distraint and sale arises only after notice and demand.

It would seem to require not much exposition to demonstrate that when the sovereign establishes any priority in his favor, and imposes certain conditions upon the enforcement of that right it is required to comply within the conditions which it has laid down. Since no levy was made upon the funds involved, one of the jurisdictional prerequisite for the application of section 3710 is lacking, and the complaint was rightly dismissed. Cf. United States v. Aetna Life Insurance Co. of Hartford Conn., D. C., 46 F. Supp. 30, 37. [Emphasis added.]

Furthermore, the parties, are referred to Kulawy v United States, 917 F-2d 729 (2nd Cir., 1990) wherein the court addresses a similar issue and states at page 734 the following:

The government's power to levy on and seize property for tax collection is one of the small number of "extraordinary situations" in which the government may seize properly without providing prior judicial hearing [Citations omitted.] This power to proceed on a "pay first. litigate later" basis is justified by the government's need to make tax collection expeditious. '"T]axes are the life blood of government, and their prompt and certain availability an imperious need. Time out of mind therefore, the sovereign has resorted to more drastic means of collection" Bull v. United States, 295 U.S. 247, 259-60, 55 S. Ct. 695, 699, 79 L.Ed. 1421 (1935); See also GM Leasing Corp. v. United Sates, 429 U.S. 338, 352 n.18, 97 S. Ct. 619, 628 n.18, 50 L.Ed. 2d. 530 (1977); Philips v. Commissioner, 283 U.S. 589, 595-99, 51 S. Ct. 608, 611-12, 75 L.Ed. 1289 (1931).

The legitimacy of allowing the government to seize and sell property prior to adjudication, however, has long been recognized to depend on strict compliance by government officials with the procedures prescribed by

law. As Chief Justice Marshall stated:

That no individual or public officer can sell, and convey a good title to, the land of another, unless authorized to do so by express law, is one of those self-evident propositions to which the mind assents, without hesitation; and that the person invested with such a power must pursue with precision the course prescribed by law or his act is invalid, is a principle which has been repeatedly recognized in this court.

Thacher v. Powell, 19 U.S. (6 Wheat.) 119, 125, 5 L.Ed. 221 (1821). Thus. "[t]he general rule is that strict compliance with statutory provisions is required to validate tax sales." Johnson v. Gartlan, 470 F.2d., 1104, 1106 (4th Cir.) (Absent ratification by the taxpayer, sale is voidable where IRS has failed to comply with Section 6335), cert. denied, 414 U.S. 865, 94 S. Ct. 122, 38 L.Ed. 2d. 85 (1973); See also Reece v. Scogins, 506 F.2d 967, 970-71 (5th Cir. 1975) (" Section 6335 permitting the sale at public auction of a taxpayers land to satisfy a tax deficiency must be strictly construed"); cf Fuentes v. Shevin, 407 U.S. 91, 92 S.Ct. at 2000 (a prerequisite for summary seizure of property is that "the state has kept strict control over its monopoly of legitimate force" by, inter alia, providing standards in a narrowly drawn statute). In keeping with these principles, we have ruled that the government's sale of property after giving only one days public notice instead of the ten days required by sections 3693 (b) and (c) of the 1939 Code was invalid. See Margiotta v. United States, 214 F.2d. 518, 522 (2d. Cir. 1954) (short public notice was one of several "substantial defects").

…

A stickler for enforcing the statutory notice it is entitled to receive, the government should be no less punctilious with respect to the statutory notice it is required to give.

The IRS did nothing more than send "a Notice of Levy" when the Plaintiffs pointed out the deficiency in the procedure for seizure of their money to their financial institution no efforts were made by the financial institution to require strict compliance of the Internal Revenue Code or otherwise investigate this matter further.

In others words, the Plaintiffs' concerns stated to the BOULDER DAM CREDIT UNION merited investigation on the part of the fiduciary and received none

[scottinalaska]

Livefire,
You have come through with some gems. Thank you for the completeness and efficiency.
In my reading of the complimentary included "Excerpts from the IRC" paper sent with the other stuff, I see again and again, "Upon demand by the Secretary" and "by the Secretary" always in context with the levy action.
My "Notice of Levy" is signed (stamped) by A.M. Owens, the Service Representative with the title in the next column, Operations Manager, Collections.
I don't see nothin' about being a secretary about anything!
Is this the Secretary of the Treasury they refer to?
scottinalaska

[Livefire]

For an action to constitute a levy, there is case law which states that it must also be accompanied by a warrant of distraint. Tax cases are considered to be admiralty cases which take on the nature of civil actions.
(per The Huntress, 12 Fed. Case 984 at 992, no. 6914, (1840). A libel of review might be in order methinks.

[scottinalaska]

One more interesting note, now that I have gotten the fax the District Office Accounting Lady received with HER instructions:
"This levy requires you to turn over to us: (1) this taxpayer's wages and salary that have been earned but not paid yet, as well as wages and slary earned in the future until this levy is released."
From this statement alone, she is feeling obligated by law to do this. She even called the IRS this morning to make sure that she wasn't allowed to reimburse my wife for going to a conference that the District Office told her to go to already!
One last interesting tidbit that might warrant comment:
The graphic on the one page Notice shows five columns with Kind of tax, Tax period, Unpaid balance, etc. Under Kind of tax, it is listed "1040A". IS THIS a kind of tax? Help me out here, I have heard of an alcohol tax, a sales tax, property tax, but a 1040A tax? This bluff is blundering in my book. Correct me if I am wrong.
I just need to figure out how to nicely present this without her freaking out about it. I am not there to teach the lady about the evil IRS. I am only there to prevent her from stealing. And I need to do this nicely. And she wants to begin in three days because she thinks the Notice is the law!
Arrrgh.
Thoughts? Have I misstepped here somewhere?
thanks,
scottinalaska

[rentiap]

Scott;
I know that this has been discussed in other threads before and this same question has been asked.
Does your wife fit the discription as highlighted?
And was this section included in the letter that was given to her employer or was it conveniently excluded?
Is she an employee?as defined in the IRC?
Is she a person as defined in the IRC?

Sec. 6331. Levy and distraint
TITLE 26, Subtitle F, CHAPTER 64, Subchapter D, PART II, Sec. 6331.
STATUTE

(a) Authority of Secretary
If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax (and such further sum as shall be sufficient to cover the expenses of the levy) by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax. Levy may be made upon the accrued salary or wages of any officer, employee, or elected official, of the United States, the District of Columbia, or any agency or instrumentality of the United States or the District of Columbia, by serving a notice of levy on the employer (as defined in section 3401(d)) of such officer, employee, or elected official. If the Secretary makes a finding that the collection of such tax is in jeopardy, notice and demand for immediate payment of such tax may be made by the Secretary and, upon failure or refusal to pay such tax, collection thereof by levy shall be lawful without regard to the 10-day period provided in this section.

Let’s see are you a person as defined by the IRC?
1.1 Question (1.1): Definition of “Person”

4 U.S.C. Section 110(a) defines the word “person” by pointing to a nonexistent 26 U.S.C. Section 3797. 26 U.S.C. §7701(a)(a) defines “person” as follows:

Sec. 7701(a)(1) Person. The term “person” shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation. [NOTE: Chapter 61 of the IRC contains sections 6001 and 6011, in which context the word “person” is found. Definitions for certain words in each chapter are usually found within the chapter. The word “person” is not defined in Chapter 61; thus Chapter 79’s definition holds.]

Interestingly, the above word “individual” used in the definition of “person” is never defined anywhere in the Internal Revenue Code, so we have to use the definition from the legal dictionary. Don’t use the definition from the conventional dictionary or you’ll really confuse yourself! Here is the definition of “individual” in Black’s Law Dictionary, Sixth Edition, page 773, we find:

Individual. As a noun, this term denotes a single person as distinguished from a group or class, and also, very commonly, a private or natural person as distinguished from a partnership, corporation, or association; but it is said that this restrictive signification is not necessarily inherent in the word, and that it may, in proper cases, include [be limited to] artificial persons.

So naming “individuals” as “persons” liable for tax in 26 U.S.C. 7701(a)(1) still doesn’t imply natural persons like you and me, and according to the above legal definition, “individual” most commonly refers to artificial persons, which in this case are federal corporations and partnerships as point out in chapter 5 extensively. The only thing Congress has done by using the word “individual” in the definition of “person” is create a circular definition. Such a circular definition is also called a “tautology”: a word which is defined using itself, which we would argue doesn’t define anything! If Congress wants to include natural persons as those liable for the income tax, then they must explicity say so or a Internal Revenue Code is void for vagueness. Therefore, we must conclude that “persons” may only mean artificial entities unless and until Congress explicitly and clearly specifies otherwise.

“Keeping in mind the well-settled rule that the citizen is exempt from taxation unless the same is imposed by clear and unequivocal language, and that where the construction of a tax law is doubtful, the doubt is to be resolved in favor of those upon whom the tax is sought to be laid.” Spreckels Sugar Refining Co. v. McClain, 192 U.S. 397 (1904)

People generally consider the term "person" to mean a natural person. But, IRC Section 7701(a)(1), entitled "Definitions", includes an individual, corporation, a trust, an estate, a partnership, an association, or company as being a "person". All of these legal entities are "persons" at law, so it is legally correct but very misleading when the federal income (excise) tax on corporations is described by the deceptive title of "Personal Income Tax". This misleading description leads most people to incorrectly believe that it means a tax on natural persons.

"Persons" are actually divided into two main groups:

1. A Natural Born person (what most people think of as a "person").

2. A "legal fiction" that exists because of a privilege granted by government, including corporations, associations, partnerships, companies, etc.

There is a big difference between the legal rights of a natural person and an artificial person.and the distinction is never explained or clarified anywhere in the U.S. Code or Internal Revenue Code. The latter are subject to the Uniform Commercial Code (U.C.C.) and have no constitutional rights under the Bill of Rights. Instead, their rights are defined and circumscribed by the privileges granted to them solely by the government within the laws written and enforced by that government. Natural born persons, on the other hand, have fundamental constitutional rights that "legal fictions" don't. For instance, a natural born person cannot, under the 5th Amendment, be compelled to testify against himself in a court of law, but a "legal fiction", such as a corporation can be compelled because it depends on privileges and recognition granted by the government for its existence and therefore falls under the jurisdiction of that government. That is why the constitution permits income taxes as indirect, excises placed upon "legal fictions", such as corporations, businesses, partnerships, trusts, etc., while it does not permit direct taxes on "natural born persons", which are not "legal fictions" but instead creations of God with inalienable rights, and whose creation and existence precedes and supercedes that of government. You could say that the obligation to pay taxes on the part of a "legal fiction" like a corporation is part of the price paid for the right to exist and have the entity recognized and protected by the government and the courts. For instance, one benefit that corporations have that natural born persons don't have is limited liability, where individuals within the corporation aren't personally liable for the financial obligations of the company. This privilege or right of a corporation, which is recognized in the law and by the courts, comes with a price. That price is the obligation of the corporation to pay income taxes as excises to the government.

The legal term "person" has an even more restricted definition when used in IRC Chapter 75, which contains all the criminal penalties in the Code. In 26 U.S.C. §7343 of that Chapter, a "person" subject to criminal penalties is defined as: ...

[A]n officer or employee of a corporation, or a member or employee of a partnership, who, as such officer, employee or member, is under a duty to perform the act in respect of which the violation occurs.

An individual who is not in such a capacity is not defined as a "person" subject to criminal penalties. Unprivileged natural persons, who do not impose the income (excise) tax upon themselves by volunteering to file returns and be liable, are not subject by law to the tax and they are not "persons" who can lawfully be subjected to criminal charges for not filing a return or not paying income tax. Sections of the Code relating to the requirements for filing returns, keeping records, and disclosing information state that those sections apply to "every person liable" or "any person made liable". These descriptions mean "any person who is liable for the tax". They do not state or mean that all persons are liable. The only persons liable are those "persons" (legal entities such as corporations or employees or corporations) who owe an income (excise) tax, and are therefore subject to the requirements of the IRC. If you substitute the word "corporation" for the term "person" (a corporation is a person at law) when reading the Code or other articles and publications relating to income tax, the true meaning of the Code becomes more apparent.

[scottinalaska]

Indeed, this all makes sense. And I appreciate the explicit answer.
I suppose when the rubber meets the road, my wife's paycheck is gone until the IRS's 11K is satisfied.
Thus, I need to diplomatically convince the lady who earns half the amount my wife earns to honor the law and not a paper.
Crazy, but in a lot of ways, all of our study comes to not if someone is bound to steal from you!
So I guess I am looking for practical approaches and prayers here! ;-)
scottt

[Livefire]

Scott,

A notice of levy ISNT the same as a levy according to the Boulder Dam Credit Union decision. There has to be a warrant of distraint attached. Unfortunately you will have to file suit against the employer for breach of fiduciary duty. The employer has to do its due diligence to make sure the request by IRS has followed proper legal procedure and documentation. The IRS itself is another battle front.

[scottinalaska]

So we come to the point of threatening suit if they send/take/steal my wife's money.
Anyone want to place bets on whether I can do a sufficient job convincing her and her lady boss to basically ignore the Notice?
The wife had a hard day at work with flurries of emails from the accountant lady and her boss telling my wife and the school secretary to NOT reimburse her for anything. This now includes all of the food and supplies she bought last week for the Regional Special Olympics on Saturday. Of course it was purchased as a favor to prevent the school who sponsors it from having to put together purchase orders, etc.
These ladies pride themselves on the letter of the law technique. Too bad they don't know the law.
Anyone want to change their bets?
Somehow, I don't think they want ME to teach them the law. I don't want to either. But they have left me with no choice in the matter.
scottinalaska