Levies and Seizures

LEVIES AND SEIZURES: THE TRUTH

The following letter contains some very important information that Americans need to know and understand about how the IRS pulls off fraud with their seizures and levies. This is a lengthy piece but it well worth your time to read it - especially if you're looking at a "notice" of one sort or another from this rogue operation of thieves called the IRS. I guarantee you will find the information in this letter from Mr. Schlaback shocking and reveals the depths to which the IRS will go to as they lie and cheat Americans - sanctioned by Congress and don't you dare delude yourself otherwise.

John J. Schlaback
Taxes - Accounting - Estate Planning
Box 58
Colbert, Washington 99005
William H. Wyttenbach, M.D.
Florida

October 9, 1998

Dear Dr. Wyttenbach,
At your request, the following is what I have gleaned from researching the Internal Revenue Code regarding Seizures and Levies. The main issues are: Does the IRS have authority without a court order? Does the property have to be turned over without a court order? Are the rights, as guaranteed by the United States Constitution, violated?

About my experience; I have been providing accounting services since 1984. I have been representing clients since 1985 in corporate, partnership, trusts, sole proprietorship and personal income taxes. I have represented clients before the IRS and assisted them in preparing for Tax Court trials. The IRS frequently serves levy notices on third parties who may be holding your property. The IRS knows that all of the notices of levy that are sent to you or your employer are incorrect unless it is for property subject to levy upon which levy has been made.

In reading the information as stated in the notice of levy, a person is required to turn over property because a tax liability exists and the person named has refused to pay. I would strongly recommend that you not refuse to pay any taxes you are liable for.

The Code is clear that IRS agents should take their case to court just like any other agency* that wants to garnish property to allow you to be heard and to ensure your rights to due process will not be violated. This can be understood by reading IRC section 7608 wherein Congress clearly instructs and outlines the revenue agents/officers authority. And, indeed this explains what the IRS agents are supposed to do in every case. To enforce collection of a delinquent tax, the IRS must be authorized and you must have a liability.

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, as follows:

SECTION 7401, Authorization.
No civil action for the collection or recovery of taxes, or of any fine, penalty, or forfeiture, shall be commenced unless the Secretary authorizes or sanctions the proceedings and the Attorney General or his delegate directs that the action be commenced.

SECTION 7403, Action to enforce lien or to subject property to Payment of tax.
(a) Filing - In any case where there has been a refusal or neglect to pay any tax, or to discharge any liability in respect thereof, whether or not levy has been made, the Attorney General or his delegate at the request of the Secretary, may direct a civil action to be filed in a district court of the United States to enforce the lien of the United States under this title with respect to such a tax or liability or to subject any property, of whatever nature, of the delinquent, or in which he has any right, title, or interest, to the payment of such tax or liability. For purposes of the preceding sentence, any acceleration of payment under section 6166(g) shall be treated as a neglect to pay tax.

(b) Parties - All persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto.

(c) Adjudication and decree - The court shall, after the parties have been duly notified of the action, proceed to adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property, and, in all cases where a claim or interest of the United States therein is established, may decree a sale of such property, by the proper officer of the court, and a distribution of the proceeds of such sale according to the findings of the court in respect to the interests of the parties and of the United States. If the property is sold to satisfy a first lien held by the United States, the United States may bid at the sale such sum, not exceeding the amount of such lien with expenses of sale, as the Secretary directs.

This is the due process written into the Internal Revenue Code as mandated by the Fourth Amendment to the Constitution of the United States of America. 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. There are two concepts to get across. It is important to discuss the difference between a "levy" and a "seizure." A "seizure"means the act of taking into custody or control something which before was not in custody or control. A "levy" is not a single act, but rather is the whole process by which the money needed to pay a tax is raised, either by exercising control over something already in custody and control of the government or by distraining and seizing property not already in custody of the government. The levy process includes the sale of levied property and the application of the proceeds to the unpaid tax.

Please note that 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 specific procedures that must be followed for a garnishment to be lawful, unless one voluntarily consents. Please read section 6331, which the IRS agents use when they send a notice of levy. This section at (a) states that the Secretary may serve, on any person who refuses to pay a tax, a levy upon all property and rights to property of said person. Further, there must be a lien filed on such person for the payment of such tax. The section provides that a notice of levy may be served on the employer for 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. Any other employer requires the IRS to proceed with a court action to take property belonging to a third party.

This should have covered the definitions of seizures and levies for you. Now I will use Title 26 U.S.C. to tell you the procedures the IRS must use. I will start with "seizures." The authority for "seizures" comes from Internal Revenue Code sections 7321 and 7608 as follows: As stated in Goodwin v. United States and Kulway v. United States, the IRS compliance with the Lien-seizure- levy process must be strict and literal.

SECTION 7321. Authority to seize property subject to forfeiture.
Any property subject to forfeiture to the United States under any provision of this title may be seized by the Secretary.

SECTION 7608. Authority of internal revenue enforcement officers.
(a) Enforcement of subtitle E and other laws pertaining to liquor, tobacco and firearms.*
Note: Please remember jurisdiction here as it relates to international treaties- this is critical as it relates to ATF.
http://www.devvy.com/jurisdiction_20000110.html
http://www.devvy.com/jurisdiction_20000112.html
http://www.devvy.com/jurisdction_20000114.html

The second absolutely critical things to remember here is the irrefutable fact that the IRS was never created by an act of Congress and by the IRS' own admission, they are not an agency of the federal government: http://www.devvy.com/irs_20000208.html. By what authority then do these renegades have to seize or levy anyone's assets?

Any investigator, agent, or other internal revenue officer by whatever term designated, whom the Secretary charges with the duty of enforcing any of the criminal, seizure, or forfeiture provisions of subtitle E or of any other law of the United States pertaining to the commodities subject to tax under such subtitle for the enforcement of which the Secretary is responsible may --
(1) carry firearms
(2) execute and serve search warrants and arrest warrants, and serve subpoenas and summonses issued under authority of the United States;
(3) in respect to the performance of such duty, make arrests without warrant for any offense against the United States committed in his presence, or for any felony cognizable under the laws of the United States if he has reasonable grounds to believe that the person to be arrested has committed, or is committing such felony; and
(4) in respect to the performance of such duty, make seizures of property subject to forfeiture of the United States.
(b) Enforcement of laws relating to internal revenue other than subtitle E
(1) Any criminal investigator of the Intelligence Division or of the Internal Security Division of the Internal Revenue Service whom the Secretary charges with the duty of enforcing any of the criminal provisions of law relating to internal revenue for the enforcement of which the Secretary is responsible, or any other law for which the Secretary has delegated investigatory authority to the Internal Revenue Service, is, in the performance of his duties, authorized to perform the functions described in paragraph (2).
(2) The functions authorized under this subsection to be performed by an officer referred to in paragraph (1) are --
(A) to execute and serve search warrants and arrest warrants, and serve subpoenas and summonses issued under the authority of the United States;
(B) to make arrests without warrant for any offense against the United States relating to the internal revenue laws committed in his presence, or for any felony cognizable under such laws if he has reasonable grounds to believe that the person to be arrested has committed or is committing any such felony; and
(C) to make seizures of property subject to forfeiture under the internal revenue laws.

As noted in these sections, Internal Revenue Enforcement Officers, when enforcing both Subtitle E taxes as defined in 76-8, are given authority to make seizures of "property subject to forfeiture." It becomes important to know at this point exactly what property comes within the meaning of "property subject to forfeiture" since, if the property is outside the scope of the meaning of"property subject to forfeiture," the Internal Revenue Enforcement Officer is not authorized to seize it.

The definitions of "property subject to forfeiture" are found in the Internal Revenue Code under Subchapter C - Forfeitures, part 1 at sections 7301 through 7304, as follows:
SECTION 7301. Property subject to tax:
(a) Taxable articles- Any property on which, or for or in respect whereof, any tax is imposed by this title which shall be found in the possession or custody or within the control of any person, for the purpose of being sold or removed by him in fraud of the internal revenue laws, or with design to avoid payment of such tax, or which is removed, deposited, or concealed, with intent to defraud the United States of such tax or any part thereof, may be seized, and shall be forfeited to the United States.
(b) Raw materials --All property to be found in the possession of any person intending to manufacture the same into property of a kind subject to tax for the purpose of selling such taxable property in fraud of the internal revenue laws, or with design to evade the payment of such tax, may also be seized, and shall be forfeited to the United States.
(c) Equipment --All property whatsoever, in the place or building, or any yard or enclosure, where the property described in subsection (a) or (b) is found, or which is intended to be used in the making of property described in subsection (a), with intent to defraud the United States or tax or any part thereof, on the property described in subsection (a) may also be seized, and shall be forfeited to the United States.
(d) Packages--All property used as a container for, or which shall have contained, property described in subsection (a) or (b) may also be seized, and shall be forfeited to the United States.
(e) Conveyances--Any property (including aircraft, vehicles or draft animals) used to transport or for the deposit or concealment of property described in subsection (a) or (b), or any property used to transport or for the deposit or concealment of property which is intended to be used in the making or packaging of property described in subsection (a), may also be seized, and shall be forfeited to the United States.

SECTION 7302. Property used in violation of internal revenue laws.
It shall be unlawful to have or possess any property intended for use in violating the provisions of the internal revenue laws, or regulations prescribed under such laws, or which has been so used, and no property rights shall exist in any such property. A search warrant may issue as provided in chapter 205 of title 18 of the United States Code and the Federal Rules of Criminal Procedure for the seizure of such property. Nothing in this section shall in any manner limit or affect any criminal or forfeiture under the provisions of this section and the disposition of such property subsequent to seizure and forfeiture, or the disposition of the proceeds from sale of such property, shall be in accordance with existing laws or those hereafter in existence relating to seizures, forfeitures, and disposition of property of proceeds, for violation of the internal revenue laws.

These code sections give us the comprehensive list of property which Internal Revenue Enforcement Officers have authority to seize. If any property does not fall within the above descriptions it is not "property subject to forfeiture" and the Internal Revenue Enforcement Officers have no authority to seize it.

SECTION 7303. Other property subject to forfeiture.
There maybe seized and forfeited to the United States the following:
(1) Counterfeit stamps--Every stamp involved in the offense described in section 7208 (relating to counterfeit, reused, canceled, etc., stamps), and the vellum, parchment, document, paper, package or article upon which such stamp was placed or impressed in connection with such offense.
(2) False stamping of packages--Any container involved in the offense described in section 7271 (relating to disposal of stamped packages), and of the contents of such container.
(3) Fraudulent bonds, permits, and entries--All property to which any false or fraudulent instrument involved in the offense described in section 7207 relates.

SECTION 7304. Penalty for fraudulently claiming drawback.
Whenever any person fraudulently claims or seeks to obtain an allowance of drawback on goods, wares, or merchandise on which o internal tax shall have been paid, or fraudulently claims any greater allowance of drawback than the tax actually paid, he shall forfeit triple the amount wrongfully or fraudulently claimed or sought to be obtained, or the sun of $500.00, at the election of the Secretary.

The levy process includes the power of seizure as authorized in section 7321 and 7608, which is evidenced by sections 7701(a)(21) and 6331(b) as follows:
SECTION 7701. Definitions(a)(21) Levy--The term "evy" includes the power of distraint and seizure by any means.

SECTION 6331(b) Seizure and sale of property--The term "levy" as used in this title includes the power of distraint and seizure by any means.
The word "distraint" basically means to retain possession of property, by force if necessary, once it is in the possession of the government. The phrase "by any means" applies to the seizures when and where authorized and to distraining the property once in the government's possession. Internal Revenue Officers are thus given very broad authority to carry out their legitimate functions.

The authority to "levy" comes from Internal Revenue Code Section 66331, as follows:
SECTION 6331. Levy and distraint.
(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 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 of 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.
(b) Seizure and sale of property--The term "levy"as used in this title includes the power of distraint and seizure by any means. Except as otherwise provided in subsection (e), a levy shall extend only to property possessed and obligations existing at the time thereof. In any case in which the Secretary may levy upon property or rights to property, he may seize and sell such property or rights to property (whether real or personal, tangible or intangible).
(c) Successive seizures--Whenever any property or right to property upon which levy has been made by virtue of subsection (a) is not sufficient to satisfy the claim of the United States for which levy is made, the Secretary may, thereafter, and as often as may be necessary, proved to levy in like manner upon any other property liable to levy of the person against whom such claim exists, until the amount due from him, together with all expenses, is fully paid.
(d) Requirement and notice before levy
(1) In general--Levy may be made under subsection (a) upon the salary or wages or other property of any person with respect to any unpaid tax only after the Secretary has notified such person in writing of his intention to make such levy.
(2) 30-day requirement--The notice required under paragraph (1) shall be--
(A) given in person,
(B) left at the dwelling or usual place of business of such person, or
(C) sent by certified or registered mail to such person's last known address, no
no less than 30 days before the day of the levy.
(3) Jeopardy--Paragraph (1) shall not apply to a levy if the Secretary has made a finding under the last sentence of subsection (a) that the collection of tax is in jeopardy.
(4) Information included with notice--The notice required under paragraph (1) shall
include a brief statement which sets forth in simple and nontechnical terms--
(A) the provisions of this title relating to levy and sale of property,
(B) the procedures applicable to the levy and sale of property under this title,
(C) the administrative appeals available to the taxpayer with respect to such
levy and sale and the procedures relating to such appeals.
(D) the alternatives available to taxpayers which could prevent levy on the
property (including installment agreements under section 6159),
(E) the provisions of this title relating to exemption of property and release
of liens on property, and,
(F) the procedures applicable to the redemption of property and the release
of a lien on property under this title.
(e) Continuing levy on salary and wages--The effect of a levy on salary or wages payable to or received by a taxpayer shall be continuous from the date such levy is first made until such levy is released under section 6343.
(f) Uneconomical levy--No levy may be made on any property if the amount of the expenses which the Secretary estimates (at the time of levy) would be incurred by the Secretary with respect to the levy and sale of such property exceeds the fair market value of such property at the time of levy.

You can see that 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.

After a levy is authorized, the property upon which the levy extends is given in Section 6331(b), which says that the Secretary may levy "only to property possessed and obligations existing at the time thereof." If the property is not already possessed by the Secretary, the property may be brought into the Secretary's possession by seizure and distraint; but, remember, only property "subject to forfeiture" may be seized. Section 6331 embraces the power given under Sections 7321 and 7608, it does not expand upon it.

Section 6331(b) has given us a very important definition. It has given us the definition of "property subject to levy," a phrase which makes its appearance in certain key places in both the Internal Revenue Code and in the Treasury Regulations. "Property subject to levy" basically means property which is not exempt from levy under section 6334.

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