Source: http://www.irs.gov/irm/part25/irm_25-003-003.html
Timestamp: 2013-05-21 08:57:22
Document Index: 664638208

Matched Legal Cases: ['§ 7433', '§ 7433', '§ 2410', '§ 6331', '§ 6402', '§ 6672', '§ 2410', '§ 2410', '§ 2410', '§ 7426', '§ 7426', '§ 7432', '§ 7433', '§ 6343', '§ 7426', '§ 7432', '§ 7432', '§ 7433', '§ 7433', '§ 7433', '§ 7433', '§ 7433', '§ 301', '§ 301', '§ 7430', '§ 7433', '§ 7430', '§ 7430', '§ 301', '§ 7433', '§ 301', '§ 7433', '§ 7433', '§ 7433', '§ 7433', '§ 7433', '§ 7433', '§ 7426', '§ 7426']

Internal Revenue Manual - 25.3.3 Suits Against the United States and Claims for Damages under IRC § 7433
Section 3. Suits Against the United States and Claims for Damages under IRC § 7433
25.3.3.6
Subpoenas and Requests for IRS Personnel to Testify or Produce Records 25.3.3.7
25.3.3.8
Damages - Civil Cause of Action for Unauthorized Collection Action 25.3.3.10
25.3.3.1 (07-20-2010)General
Generally, when the United States is named as a defendant in a suit arising from the collection of tax liability, Area Counsel
sends a defense letter to the Department of Justice, Tax Division. In some situations, however, the case will be directly
referred to the local U.S. Attorney's Office.
The deadline for the United States to file an answer or otherwise respond to a complaint, counterclaim, or cross-claim in
federal district court is generally 60 days from the date of service of the summons and complaint on the U.S. Attorney.
Because meeting time limits in judicial actions is critical, promptly respond to all requests from Area Counsel; the Department
of Justice, Tax Division; or the U.S. Attorney's Office. Strictly observe time frames identified in the requests.
Advisory is responsible for internal control of and actions pertaining to most litigation against the United States. Exceptions
Tax Court litigation, which is controlled by Appeals.
Refund litigation not involving trust fund recovery penalties, which is controlled by campus refund litigation units in the
Accounting Branch of the appropriate campuses.
25.3.3.2 (07-20-2010)Receipt of Service of Summons and Complaint
Proper service of the summons and complaint is necessary to bring an action against the United States. Therefore, information
relating to the manner in which the IRS received notice of the suit is important.
Service on the United States is governed by Rule 4(i) of the Federal Rules of Civil Procedure. To make proper service on the
United States in tax-related litigation, a plaintiff must:
deliver a copy of the summons and complaint to the U.S. Attorney, an Assistant U.S. Attorney, or designated clerical employee,
for the district in which the action was filed; or send a copy of the summons and complaint by registered or certified mail
addressed to the civil process clerk at the U.S. Attorney's Office;
if the action challenges an order of a nonparty agency or officer of the U.S., send a copy of the summons and complaint by
registered or certified mail to the IRS or the officer.
If you receive service of a summons and complaint, date-stamp it and immediately forward it to Advisory. Include information
regarding the manner in which the documents were served (e.g., personal delivery, certified mail).
Advisory will immediately forward a complete set of the documents to Area Counsel and the U.S. Attorney's Office unless local
procedures are established with Area Counsel and the U.S. Attorney's Office that copies of documents in certain types of suits
need not be provided to that office.
Include complete information on how, when and by whom service was received. 25.3.3.3 (07-20-2010)Removal of Action from State Court
The United States can remove a suit brought in any state court to federal district court if it is named as a party defendant.
See IRM 5.17.5.6, Removal to Federal Court.
The United States has the same right of removal if it is not named as a party defendant if it intervenes in the state court
Because the time period for removing an action to federal district court is short, generally within 30 days after receipt
of a copy of the complaint, Area Counsel should immediately be notified whenever a complaint filed in a state court proceeding
is received and there is any question as to whether the case should be removed to federal district court. Ensure Advisory
is also notified so proper controls can be established.
25.3.3.4 (07-20-2010)Initial Review and Routing/Processing (Field and Advisory)
When service of a summons and complaint is made on the IRS, prompt correct action is essential to ensure that a timely, complete
Prompt analysis and action is also important when it is discovered through other means that the United States has been made
a party to litigation.
25.3.3.4.1 (07-20-2010)Field Actions
When service of a summons and complaint is received or litigation against the United States is otherwise discovered, the following
Forward all original documents and other pertinent information to Advisory. Information regarding date, time and method of
service should be included. Thoroughly document the case history.
25.3.3.4.2 (12-07-2010)Advisory Review and Processing
Review any summons or subpoenas received to determine response or appearance date set by the court.
Forward documents immediately to Area Counsel and/or the U.S. Attorney's Office depending upon established local practice
for the type of suit. Retain copies as needed. If the response date or appearance date is imminent, call Area Counsel and/or
the U.S. Attorney's Office to advise, and hand deliver the documents to them. If hand delivery is not feasible, send the documents
by overnight mail.
Open a case on the Integrated Collection System (ICS) no later than 10 calendar days after receiving notice that a suit has
been filed against the IRS.
Advise and provide applicable guidance to field or ACS personnel to whom affected accounts are assigned. Seek Area Counsel
guidance as needed and appropriate.
Take applicable initial actions as described in IRM 25.3.6, Open Litigation Control, Monitoring, and Closing Actions.
25.3.3.5 (07-20-2010)Information for Defense of Suits
In some cases, information/evidence will need to be gathered and a report prepared to assist in defending the government's
position. In such cases, Advisory will ensure that any narrative report necessary to reflect the factual situation is prepared
and that other data requested or required by counsel is secured. Specific reporting forms are not prescribed for use in all
types of defense suits.
Form 4477, Civil Suit Recommendation; Form 4479, Lien and Claimant Data - Civil Suit; and Form 4480, Property Description
- Civil Suit; will be used for interpleaders and suits in the nature of an interpleader. These forms may also be used for
other defense suits when appropriate.
When necessary, Advisory will issue courtesy investigations to Field Collection to gather information and prepare reports.
The requested action must be taken promptly and completed within the specified time frames to ensure proper defense of the
If a request from Area Counsel or the Department of Justice requires additional investigation or examination by either a revenue
officer or a revenue agent, Advisory will have a copy of the request hand delivered to Collection or Examination, as applicable,
and request that the investigation or examination be given preferential treatment and that the information be furnished as
Form 4481, Transmittal - Legal Action, will be used in all cases to transmit to Area Counsel and/or the U.S. Attorney's Office,
as appropriate, the transcript, administrative files, reports and other documents required. Upon receipt of a summons and complaint or a request for data, Advisory will determine the periods of tax liability in question
and take action to secure a certified transcript, if necessary.
Form 4844, Request for Terminal Action, will be prepared and forwarded to Case Processing to secure the administrative files
Advisory, with the assistance of Area Counsel, will review the complaint and determine what documents are needed. These documents
may include: original and refiled Notices of Federal Tax Lien in cases where lien priority is an issue (e.g., 28 USC § 2410 cases).
files and reports associated with tax adjustments or substitutes for return, such as revenue agent reports and substitute
for return files.
Form 872, Consent to Extend the Time to Assess Tax, or Form 900, Tax Collection Waiver, in cases where timeliness of assessment
or collection is an issue. any Closing Agreements that the taxpayer may have signed.
statutory notices (90-day letter for assessment notice and demand, etc.). copies of offers in compromise, proofs of claim, and data as to other court proceedings in cases where the collection statute
may be an issue (e.g., discharge of tax liabilities under the provisions of the Bankruptcy Code). Closed BAL DUE, offer in
compromise, collection due process or trust fund recovery penalty files may be needed.
other information or documents may include, but are not limited to, notices of levy, seizure and sale documents, data as to
whether a jeopardy assessment is involved, data as to the existence and/or validity of competing liens and/or claims (including
copies of instruments when necessary). Form 4479, Lien and Claimant Data - Civil Suit, may be used for providing information
regarding other liens and/or claims.
In most cases the required data can and should be anticipated and gathered before a request is received from the U.S. Attorney
or Area Counsel since Advisory will normally have received notification of the pending suit through direct sources.
Advisory will ensure that required data is secured promptly and will follow-up on all requests for administrative files, tax
returns, or other documents, and requests for investigations. The data should be sent to Area Counsel and/or the U.S. Attorney's
Office as soon as it is received and no later than the 45th day after the complaint or petition was filed. Counsel should
be advised of any delay by telephone, including situations where Advisory is not made aware of the suit, or does not receive
a copy of the complaint or petition, until many days after the suit is filed.
In certain types of cases or cases involving significant issues, the defense letter prepared by Area Counsel must be pre-reviewed
by the appropriate Associate Chief Counsel Office. Included in the list of issues requiring Associate Office review are collection
issues involving disregarded entities, the collection of partnership tax liability from partners, or the application of United States v. Craft (i.e., collection of liability of one spouse from property held in tenancy by entireties). In cases requiring Associate Office
review, the required information must be sent to Area Counsel no later than the 35th day after the complaint or petition was
filed. See IRM Exhibit 31.1.1-1 and IRM Exhibit 35.11.1-1 for a list of issues requiring Associate Office review.
If required data or documents are located in a campus or other area office, the office receiving the request for such data
or documents will expeditiously initiate action to secure it and will be responsible for providing it to the requester.
25.3.3.6 (07-20-2010)Subpoenas and Requests for IRS Personnel to Testify or Produce Records Subpoenas and requests for Service personnel to testify or to produce records in all cases not involving the administration
of Internal Revenue laws should be routed as quickly as possible to the Disclosure Officer to whom the employee is assigned,
or in matters involving Headquarters employees, to the Office of Governmental Liaison and Disclosure, SE:S:CLD:GLD:D. It is
important that this information be provided without delay so that necessary authorization can be obtained within the time
allowed by the court. If time is crucial, the matter should also be reported by telephone to the Disclosure Officer or the
Office of Governmental Liaison and Disclosure, as appropriate. For further guidelines, see IRM 11.3.35, Disclosure of Official
Information Handbook, Requests and Demands for Testimony and Production of Documents. Requests by a government attorney (Area Counsel or the Department of Justice) for Service personnel to testify or produce
records on behalf of the government in referred tax cases or Tax Court cases may be complied with and do not require prior
Subpoenas and requests not served on behalf of the government for Service personnel to testify or produce records in referred
tax cases or Tax Court cases require authorization and must be routed as quickly as possible to Area Counsel so that necessary
authorization can be obtained. Area Counsel may need to coordinate with the Office of the appropriate Associate Chief Counsel
depending upon the nature of the case.
The need for immediate notification cannot be over-emphasized. By failing to take proper steps in the processing of demands
for testimony or production of IRS information, employees may subject themselves and the IRS to sanctions such as contempt
of court citations.
If necessary, it is the Disclosure Officer’s responsibility to arrange for Area Counsel to assist, or an attorney of the Department
of Justice (including U.S. Attorneys) to represent subpoenaed/requested employees, briefing the employees and appearing with
them at the proceeding.
See Delegation Order No. 11-2, IRM 1.2.49.2, for the managerial levels with the authority to determine whether an employee
will be permitted to testify or produce Service documents subpoenaed or requested in connection with judicial and administrative
proceedings. If the designated official determines that the employee may not testify or produce the records subpoenaed or
requested (in whole or in part), Area Counsel or the representative of the U.S. Attorney’s Office will, as necessary, appear
before the court with the employee and inform the court that the information may not be disclosed and explain the reason for
the information being protected.
If the delegated official’s instructions are not received by the time set for appearance, the employee will appear before
the court, with the Disclosure Officer, Area Counsel, Department of Justice trial attorney, or the representative of the U.S.
Attorney’s Office, as necessary. The court should be advised that, pursuant to 26 CFR 301.9000-1, the employee may not testify
or produce Service documents until the delegated official has considered the contents of the subpoena or request and has authorized
a Service employee to comply. The employee or the Disclosure Officer, Area Counsel, Department of Justice trial attorney,
or the representative of the U.S. Attorney’s Office should request additional time in which to receive instructions. If the
court does not grant the delay, the employee will decline to disclose the records or information sought. However, an attempt
will be made to contact the party seeking the information prior to the appearance time so that continuance might be obtained,
The determination of whether employees should be allowed to testify and what records or information, if any, may be disclosed
must take into account applicable statutes, privileges, and constitutional requirements. Any applicable privilege or protection
under law may be asserted in response to a request or demand for testimony or disclosure of IRS records or information, including,
The testimony and production authorization should be specific as to the scope of the records or testimony that may be provided.
See IRM Exhibit 11.3.35-2, Testimony Considerations, for additional information regarding demands for testimony.
25.3.3.7 (07-20-2010)Types of Suits Against the United States
The procedures to follow when a suit is filed against the United States depend upon the type of suit that is brought against
This subsection lists the principal types of suits that may be filed against the United States and the office that is responsible
for handling the case.
25.3.3.7.1 (12-07-2010)Trust Fund Recovery Penalty (TFRP) Refund Litigation - Advisory Actions
Prepare and forward a memorandum to Area Counsel containing details and status of related assessments and a recommendation
to initiate a counterclaim against the taxpayer who brought the refund suit, and a third party complaint to bring all parties
into the action. See IRM 25.3.1.4, Authorization for Filing Suits, Counterclaims or Third Party Complaints.
Secure and forward necessary certified transcripts and other needed documents on the plaintiff's assessments, all related
assessments, and certified transcripts and original returns for all underlying BMF liabilities.
If a tax module is in BAL DUE status, determine whether or not collection should be withheld and contact the unit/person to
which the module is assigned with instructions.
Under IRC § 6331(i), the running of the statutory period for collection is suspended and levy action to collect a TFRP assessment
or other divisible tax is not permitted after refund litigation has been filed, if the tax liability is attributable to tax
periods beginning after December 31, 1998. However, levy action may be taken if the taxpayer files a written waiver allowing
levy, if collection is in jeopardy, or if the levy was made prior to the taxpayer filing suit. Recording a Notice of Federal
Tax Lien (NFTL) is not prohibited, and refund offsets under IRC § 6402 are allowable. Similar restrictions and suspensions
apply if the requirements of IRC § 6672(c) are met.
25.3.3.7.2 (07-20-2010)Section 2410 Suits
Advisory is responsible for all section 2410 suits. Notices of section 2410 suits received by other functions should be forwarded
immediately to Advisory.
Refer to IRM 5.12.4, Judicial/Nonjudicial Foreclosures, for instructions and procedures pertaining to foreclosure actions to which the United States is made a party pursuant to
28 USC § 2410.
See IRM 5.17.5.18.1, and the provisions that follow, for a discussion of the types of actions that may be brought under 28
USC § 2410. These actions are generally brought in state court.
Coordination of these actions is generally handled directly though the appropriate U.S. Attorney's Office without Area Counsel
involvement. The necessary response is generally limited to the preparation of a letter to the U.S. Attorney forwarding Automated
Lien System (ALS) prints of applicable liens and information regarding unrecorded liens of relevance (statutory liens, estate
tax liens, etc.)
Area Counsel needs to be involved only if non-routine issues are presented. If Area Counsel is involved, they generally require
a copy of the summons, complaint, docket sheet, and other relevant documents. Note:
Control the case on ICS. The control can generally be closed after issuance of the letter to the U.S. Attorney's Office, except
in cases requiring further action or monitoring.
25.3.3.7.2.1 (07-20-2010)Interpleader Suits
Because there is a very short deadline for removing a case from state court to federal district court, do not wait to send
copies of the summons and complaint to Area Counsel.
Prepare a narrative memorandum detailing the facts of the case and the government's lien interest, securing information from
the person or unit to whom the case is assigned. Use Form 4481, Transmittal - Legal Action, to transmit to Area Counsel the
narrative memorandum, transcripts, administrative files, reports and documents required. Documents should include certified
copies of Notices of Federal Tax Lien and other evidence of IRS claims. Include in the narrative memorandum a discussion of the nature and extent of competing creditors' interests and include documents
that serve as evidence of such interests, such as copies of mortgages, financing statements, judgments, or state or local
tax liens. If warranted, verify the validity of such interests. For example, a mortgage against the property held by a party
related to the taxpayer may be fraudulent.
25.3.3.7.2.2 (07-20-2010)Foreclosures
See IRM 5.12.4.2, Judicial Foreclosures, and IRM 5.12.5, Redemptions, for detailed guidance for actions to take when the United States or the IRS is joined in a suit to foreclose a mortgage
or other lien under 28 USC § 2410.
25.3.3.7.2.3 (12-07-2010)All Other Section 2410 Actions
25.3.3.7.3 (07-20-2010)Actions Involving Disclosure Issues
Disclosure is responsible for providing any necessary information to Area Counsel and for securing testimony authorizations
and providing guidance to subpoenaed employees. See IRM 25.3.3.6, above.
Prior to releasing any documents in actions involving the IRS, the Disclosure Office must coordinate such disclosures with
25.3.3.7.4 (12-07-2010)Other Suits Against the United States
Advisory is responsible for answering Area Counsel and U.S. Attorney requests for assistance on other suits against the United
States, including, but not limited to, the following types of cases:
injunctions to restrain collection
wrongful levy suits (IRC § 7426)
suits to recover surplus proceeds (IRC § 7426)
damages from failure to release a lien (IRC § 7432)
damages from unauthorized collection action (IRC § 7433)
25.3.3.8 (07-20-2010)Pre-Litigation Claim Requirements
In a number of situations, taxpayers and third parties may file administrative claims for relief or restitution. Administrative
claims are commonly required before judicial action can be taken against the United States.
Common administrative claims which may be made or are required include the following. Advisory is responsible for their processing
Wrongful levy claims under IRC § 6343(b) and IRC § 7426. Guidance as to their processing and resolution is included in IRM
5.10.4.4,Release of Wrongful Seizures for Property Not Yet Sold,IRM 5.10.6.15,Wrongful Seizure - Payment of Claims After Sale, and IRM 5.11.2.2.2,Wrongful and Erroneous Levies.
Claims for damages from failure to release a lien under IRC § 7432. Guidance as to their processing and resolution is included
in IRM 5.12.3.10, Civil Cause for Action Under IRC § 7432 for Failure to Release Lien. Claims for damages from unauthorized collection action under IRC § 7433, which are addressed in IRM 25.3.3.9, below.
25.3.3.9 (07-20-2010)Damages - Civil Cause of Action for Unauthorized Collection Action IRC § 7433 authorizes the filing of a damages action against the government in federal district court when, in connection
with the collection of a tax, any officer or employee of the IRS recklessly, intentionally, or negligently disregards any
provision of the Internal Revenue Code or the related Treasury Regulations.
A suit under IRC § 7433 must be brought within two years from the date the right of action accrued. A section 7433 right of
action accrues when the taxpayer has had reasonable opportunity to discover all essential elements of a possible cause of
action for wrongful collection.
Subsection 7433(e) was added by the Restructuring and Reform Act of 1998 to allow taxpayers to petition the bankruptcy court
for actual, direct economic damages and costs of the action if the IRS willfully violated the automatic stay or discharge
Employees, acting in the performance of their duties, whose actions are challenged under IRC § 7433, will not be held personally
liable in such an action.
A judgment for damages under IRC § 7433 will not be awarded unless the court determines that the plaintiff has exhausted all
administrative remedies within the IRS. Under Treasury Regulation § 301.7433-1(f), the amount sought by suit generally cannot
exceed the amount sought in the administrative claim. In order to exhaust administrative remedies, the taxpayer must submit an administrative claim for damages in accordance with
Treasury Regulation § 301.7433-1(e).
If successful in a court action, a taxpayer may recover the lesser of $1,000,000 ($100,000 for negligence) or the sum of the
actual, direct economic damages suffered by the taxpayer as the proximate result of the reckless, intentional or negligent
action, plus the cost of the action. An award for injuries such as inconvenience, emotional distress and loss of reputation
can be paid only if the injury results in a direct monetary loss.
Litigation and administrative costs, other than the costs of the action, are not recoverable under this section. Litigation
costs, which may include attorney’s fees, may be recoverable under IRC § 7430. Administrative costs (including any costs incurred
getting the IRS to rectify a wrongful act and costs incurred pursuing an administrative claim for damages under IRC § 7433(e)
are not recoverable under IRC § 7430. However, administrative costs incurred after the date a bankruptcy petition is filed
may be awarded under IRC § 7430 for violations of the automatic stay or discharge injunctions.
Payment Authority - Claims under this provision will be paid out of funds appropriated for judgments, awards and compromise
settlements under section 1304 of Title 31 of the United States Code. For cases referred to the Tax Division of the Department
of Justice, the documents to be sent to the Judgment Fund Branch of the Financial Management Service will be prepared by these
by the Tax Financial Litigation Unit of the Office of Review, if the court enters a judgment or grants an award against the
25.3.3.9.1 (07-20-2010)Administrative Claim Procedures
Treasury Regulation § 301.7433-1(e) contains administrative claim procedures for IRC § 7433. The administrative claim is to
be sent to the Advisory Group Manager of the area where the taxpayer currently resides or, when dealing with a corporate entity,
the area where the corporate headquarters is located.
There is no standard form used in preparing a claim, but the claim must contain the following information: The name, current address, current home and work telephone numbers and any convenient times to be contacted, and the taxpayer
identification number of the taxpayer making the claim.
The grounds, in reasonable detail, for the claim, including a complete description of the unauthorized collection action and
copies of available substantiating documentation or correspondence with the Internal Revenue Service. A description of the injuries incurred by the taxpayer filing the claim, including copies of any available substantiating
documentation or evidence. The dollar amount of the claim, including any damages that have not yet been incurred but which are reasonably foreseeable
(including copies of any available substantiating documentation or evidence).
Each claim will be reviewed by Advisory to insure that it includes this information. A taxpayer whose claim does not include
the information requested in (2) above will be notified in writing, within 14 days of the receipt of the claim, of the deficiencies
and advised that the claim is not processable. This is not considered a rejection of the claim because a claim meeting the
requirements of Treasury Regulation § 301.7433-1 has not been filed. Use Letter 2730, Non-processable Claim for Damages Letter,
to notify the taxpayer of the deficiencies in the claim.
Administrative review of the claim should be completed as soon as possible but must be completed within 6 months of receipt
of a processable claim. The taxpayer may bring suit either when a final decision is made on the claim or 6 months after the
filing of a processable claim. A taxpayer must file an action in federal district court within two years after the cause of
action accrues. If the taxpayer files an administrative claim within the last 6 months of the period of limitations, the taxpayer
can file suit any time after the administrative claim is filed and before the expiration of the period of limitations. A cause of action accrues under this provision when the taxpayer has reasonable opportunity to discover all essential elements
of a possible civil action for damages in federal district court under IRC § 7433.
Letter 2732, Notification of Full or Partial Denial of Claim for Civil Damages, or Letter 2733, Notification of Full or Partial
Allowance of Claim for Civil Damages, are to be used to notify the taxpayer of the results of the administrative review of
the claim. If only a portion of the claim is being approved, both letters will be sent to the taxpayer at the same time. Payment Authority - see IRM 25.3.3.9.4, Reimbursement of Damages and Costs, below.
There is no further administrative appeal of a claim for damages under this section if the claim is denied. The remedy provided
by the statute is the institution of a suit in federal district court.
25.3.3.9.2 (07-20-2010)Evaluation of a Claim for Damages Under IRC § 7433
Open an NF OI on ICS under 185 - Claim Other. The type of claim should be noted in the comments section of the NF OI. Review
the closed files for any prior claims.
The statutory elements contained in IRC § 7433 must be applied to each processable claim. In determining whether a claim is
administratively allowable the reviewer must determine whether: an officer or employee of the IRS intentionally, negligently, or recklessly disregarded any legal or regulatory provision
of the Internal Revenue Code in connection with the collection of any federal tax; and
the taxpayer sustained direct, economic damages as a proximate result. The facts and circumstances of each case must be evaluated. The reviewer must determine if the alleged infraction did, in
fact, take place. He or she must also determine whether or not the infraction was a reckless, intentional, or negligent disregard
The reviewer must also ascertain when, in time, the taxpayer became aware of the violation or should have become aware of
the violation. Claims filed more than two years after the violation must receive special scrutiny. The taxpayer’s two year
limitation to bring suit begins at the point when the taxpayer has had a reasonable opportunity to discover all essential
elements in a possible cause of action. The reviewer must determine when the taxpayer knew or should have known of the violation.
recoverable in an administrative claim. To the extent that any costs are recoverable under IRC § 7433, such costs are recoverable
only in a court proceeding; and
Acceptance or rejection of each claim will be reviewed by Area Counsel for agreement. Include the Advisory administrative
file and all related information. After concurrence by Area Counsel, submit the file to the Advisory Territory Manager for approval.
25.3.3.9.3 (07-20-2010)Frivolous Damage Claims
Advisory must process and respond to all claims that appear to be brought under IRC § 7433, whether or not they appear to
be frivolous. Follow the procedures set forth in IRM 25.3.3.9.1, above, for any correspondence received from a taxpayer that
indicates in some fashion that the taxpayer is attempting to file a claim for damages for unauthorized collection action.
If a claim for unauthorized collection action appears to contain frivolous arguments, send the following documents/information
to the Ogden Frivolous Return Program (also known as the Frivolous Filer Unit) after the claim is processed and a response is sent to the taxpayer:
the date of receipt of the claim (this should be shown by a date stamp on the claim); the taxpayer’s name, address, and any taxpayer identification information that may be provided in the claim; and a copy of the response sent to the taxpayer.
Prepare and include Form 3210, Document Transmittal, when mailing the items. Use the Ogden Compliance Campus address: 1973
N Rulon White Blvd., M/S 4450, Ogden, UT 84404, Attention: Frivolous Return Program. Direct any questions as to whether a claim is being asserted under IRC § 7433 and should be processed under these procedures
to Area Counsel. 25.3.3.9.4 (07-20-2010)Reimbursement of Damages and Costs
If an administrative claim is submitted to the approving official, Collection personnel involved with the collection action
When a claim is approved, prepare the following: FMS Form 194 (Rev. 12-03) - Judgment Fund Transmittal
These FMS forms are available in fillable formats at the Electronic Publishing website: http://publish.no.irs.gov/catlg.html.
Under " View by Product Title Search,"
select product type "other gov"
and enter search word(s) "FMS."
Use Letter 2734 to forward the original forms described above to the Department of the Treasury, Judgment Fund Branch, Financial
Management Service, 3700 East-West Hwy, Room 6E15, Hyattsville, MD 20782.
25.3.3.9.5 (07-20-2010)Notifying the Employee’s Manager of a Claim of Unauthorized Collection Action
Advisors, with the approval of the Advisory Group Manager, should inform the manager of the employee named in the damage claim
that a claim of unauthorized collection action has been received. Follow up contact will be made to advise the manager of
the final results of the investigation of the claim.
The employee's manager will determine if NTEU representation is necessary. 25.3.3.10 (07-20-2010)Claims for Damages by Third Parties
Under IRC § 7426(h), recovery of damages is permitted by a third party in a wrongful levy suit if it is determined that any
officer or employee of the IRS recklessly, intentionally or by reason of negligence, disregarded the provisions of the Code.
The defendant will be liable to the plaintiff in an amount equal to the lesser of $1,000,000 ($100,000 in the case of negligence)
or the sum of: actual, direct economic damages sustained by the plaintiff as a proximate result of the reckless, intentional or negligent
disregard by the officer or employee (reduced by the amount of damages awarded under subsection (b) of section 7426), and
A claim for damages brought under IRC § 7426(h) should be evaluated in the same manner as other damage claims. See IRM 25.3.3.9.2,
above. See also IRM 5.17.5.17.1, Wrongful Levy, and Publication 4528, Making an Administrative Wrongful Levy Claim Under Internal Revenue Code (IRC) Section 6343(b).