The Tax Court recently held that when the IRS levies against a joint account in a state where either spouse has the unconditional right to withdraw the full amount of the account, the innocent spouse can pursue a refund under the equitable remedies of Internal Revenue Code (IRC) Section 6015(f).
Consider the case where a spouse applies for relief under the innocent spouse provisions of the IRC, and the IRS wants to levy on an account held jointly by the spouses. The IRS is prohibited from levying on an account held only by the spouse requesting relief until the request has been considered and a determination has been made regarding whether innocent spouse relief will be granted. However in the case of a IRS levy on a joint account for which one spouse has requested relief as an innocent spouse, that spouse will feel the funds were wrongfully levied. Previously, the spouse would have to make a claim of wrongful levy when joint funds were levied. Now, under Minihan v. Comm’r, 2012 U.S. Tax Ct. LEXIS 1 (Jan. 11, 2012), the account holder claiming innocent spouse can pursue a refund under the equitable provisions of IRC Section 6015(f). The Court focused on the principle that a levy is a provisional remedy that does not divest other persons with an interest in property of their rights (see National Bank of Commerce, 472 U.S. 713, 722-23 (1985); and the notion that the plain language of IRC Section 6015 provides relief beyond a wrongful levy claim in innocent spouse cases. For more information, and to learn about your options as an innocent spouse, call us at (916) 488-8501.
