The IRS is the most powerful creditor on the planet. It can walk into your bank and take all of the money out of your bank account. It can go to your employer and take virtually all of your W-2 pay.
It can go to people that owe money to you and tell them to pay those funds to the IRS. The IRS can also seize your car, home or other assets. To protect taxpayers from economic hardship, Internal Revenue Code §§ 6343 and the related regulations protect taxpayers from economic hardship stemming from an IRS levy. Economic hardship is defined as a severe discomfort or lack of necessities of life.
In a recent case, a nursing home organized as a corporation filed an employment tax return listing an unpaid liability in excess of $100,000.00. The IRS then proposed to levy on the nursing home’s assets to collect the unpaid liability. The nursing home filed a Request for a Collection Due Process Hearing with the IRS arguing that any levy would create an economic hardship on the corporation’s financial condition, and the IRS refused that relief.
A Petition was ultimately filed in the United States Tax Court by the nursing home arguing that the proposed levy would cause economic hardship to the corporation. The Tax Court ultimately ruled in favor the IRS, stating that the relief from an IRS levy as set forth in the Internal Revenue Code is limited only to individuals, and not to businesses.