Sending a Notice of Levy, is not sending a levy, and is not sufficient to reach private property, unless the property is already in the custody and control of the Secretary. The procedure to reach property in the private sector by suit is given in the Internal Revenue Code under Code sections 7401 and 7403.
If the IRS wants to enforce collection of a tax, they have to file suit in Federal District Court, obtain a judgment, and execute the judgment with a court order to lawfully enforce the collection of the delinquent tax. The only, obvious exception to this is when the Secretary already has possession of some property. In that case no court order is needed to reach the property since the property is already possessed.
a "Notice of Levy" is not a levy or seizure. The "Notice of Levy" has no legal effect in the private sector unless it is accompanied with a Judicial Court Order and a "Notice of Seizure." The following cites will demonstrate that a "Notice of Levy" carries no authority to "Levy" and that a "Levy" must be done through "seizure" of the property.
"A 'Levy' for delinquent taxes requires that property be brought into legal custody through seizure, actual or constructive, and is absolute appropriation of property levied on, and a mere NOTICE OF INTENT TO LEVY DOES NOT CONSTITUTE A LEVY" (Emphasis added). Freeman v. Mayer 152 F. Supp. 383, Affd 253 F.2d 295 (3rd Circuit 1958).
"A 'Levy' requires that the property be brought into legal custody through seizure, actual or constructive, and is absolute appropriation in law of property levied on, and MERE NOTICE OF INTENT TO LEVY IS INSUFFICIENT" (Emphasis added). United States v. O'Dell, 160 F.2d 304, 307 (6th Circuit 1947).
The IRS is to comply strictly to the conditions imposed by statute in the seizure and levy process. Goodwin v. United States, 935 F2d 1061, (9th Cir. 1991). 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. Kulway v. United States, 917 F2d 729, 735 (2nd Cir. 1990).
"Notice of levy does not constitute levy, since, for there to be levy, property must be brought into legal custody through actual or constructive seizure." Callahan v. Haxton (184, MD Fla) 84-2 USTC.
There are conditions that must be met before the Secretary is authorized to levy on property or rights to property. First, the person issuing such a levy must be authorized to perform that act. Second, you must be a person "liable" to pay a tax. Third, you must have been sent a "notice and demand" for payment of the tax. Fourth, you must have neglected or refused to pay the tax. And fifth, ten days must have elapsed after the notice and demand. (The ten day period does not apply in the case of a jeopardy determination). Also IRC section 7429(a) requires the Secretary to provide you with a written statement of how he determined that you owe a tax.
A person (employer) may think they can avoid being sued by complying with a "Notice of Levy" and turning over the property to the IRS. It is true that you (employer) would avoid being sued by the Department of Justice, but you(employer) would then be expose to being sued by the person whose property was turned over. His cause of action would be against the person taking the property since they turned the property over without a court order, without his consent or permission, and without being required to surrender the property under any statute. He would have a cause of action against the IRS for acting outside their Congressionally mandated authority and against you for turning over to the IRS without judicial process.
Section 6332(e) relies on 6331, and both sections require a levy on property, not a notice of levy. Because there is no judicial process and no levy has been made, the person taking property based on a "Notice of Levy" is not relieved from liability to the person owning the property. This section is what is referred to as the immunity section for turning over property. And it would provide immunity if the person followed the law, but did he? Did he receive a levy or a notice of levy? Lease note the title of this sub-section; it reads "effect of honoring levy." It does not say "effect of honoring a notice of levy."
When receiving a "Notice of Levy" ask questions. My suggestion would be to write a letter to the IRS agent who signed the notice and ask him the following questions:
1. Are you the agent authorized to issue the "notice of levy," "notice of seizure" or "levy?" As him/her about 7321 and 7608 and explain what these sections mean and whether they
are relative to the person on the notice.
2. What property is "subject to levy" as used in section 6332? And, is the property you are
demanding property "subject to levy upon which a levy has been made?" Please note that
I am aware of section 6502(b) which states that a levy is made on the date the section
6335(a) "Notice of Seizure" is given. Has the "Notice of Seizure" been issued?
3. Please explain the indemnification process under section 6332(d) if I turn the property
over to you and the owner of the property sues me.
4. Is this "Notice of Levy" the result of a judgment entered by a court? Since it does not
appear to be a court order, and does not have a case number or a judge's signature, what
will happen to me if I do not turn this property over to you?
5. Is a notice of levy the same thing as a levy? And, is section 6332(e) reliable when it
specifically states "effect of honoring levy," not "effect of honoring notice of levy."