Tough Luck, Taxpayer!—IRS Continues to Levy on Social Security Benefits
Many taxpayers (if not all) would agree with the sentiment expressed on a wall plaque that recently caught my eye: “Dear IRS: I would like to cancel my subscription. Please remove my name from your mailing list.” That feeling is intensified for those taxpayers who owe the Internal Revenue Service money for back taxes. The IRS has various tools at its disposal to collect outstanding tax liabilities: notices, liens, personal visits, etc. However, levies are perhaps one of the most powerful tools (weapons?) the IRS wields against taxpayers. In a recent decision by the Eleventh Circuit Court of Appeals, the Court affirmed the lower court’s determination to dismiss the taxpayer’s lawsuit against the IRS. The IRS, the Court held, acted lawfully when it continued to collect the taxpayer’s Social Security benefits from a levy it issued prior to the ten-year collection statute expiration date.
Generally, if a taxpayer fails to pay any tax owed to the federal government within 10 days after notice and demand, the Internal Revenue Service may levy upon the taxpayer’s property or rights to property. Such levies may occur independently, successively, or continuously depending on the circumstances. By statute, some levies are continuous levies in that the recipient of the notice of levy must continue to remit or pay a specified amount to the IRS after the notice of levy has been served. Other levies are not continuous and require the IRS to serve additional notices of levy to seize such property or property rights. For example, levies on wages, salaries, and Social Security benefits are continuous. However, levies on bank accounts are not continuous.
(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 such 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 or 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, proceed 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. 
Moreover, a federal tax levy distrains only property in possession and obligations in existence as of the date of the levy. The only exceptions to this general rule are: (1) the continuing levy on salary and wages; and (2) the levy on fixed, determinable, and periodic payments when the taxpayer has an unqualified fixed right to receive such payments under a contract, trust, or similar arrangement.
Dean v. United States
On June 30, 2021, the Eleventh Circuit Court of Appeals issued its decision, affirming the district court’s dismissal of Mr. Dean’s complaint for damages against the Internal Revenue Service. Mr. Dean filed a civil lawsuit in 2019, alleging that IRS employees had “negligently or recklessly disregarded various provisions of the Internal Revenue Code, in violation of 26 U.S.C. § 7433, by unlawfully seizing his Social Security benefit payments in order to pay tax debts that Dean claimed had been eliminated by operation of statute and by the IRS’s release of tax liens.”
In September 2007, the IRS assessed federal income tax liabilities against Mr. Dean for the tax years 1997 through 2005 and filed a federal tax lien. Over the next several years, Mr. Dean made payments towards the outstanding tax liabilities but failed to pay off the amounts owed. In June 2013, the IRS served a notice of levy on the Social Security Administration, seizing Mr. Dean’s “entire social security benefit.”
In September 2017, the ten-year collection period expired for the tax liabilities assessed by the IRS in 2007. While the IRS issued and filed a certificate of release of federal tax lien with respect to Mr. Dean’s property, the IRS continued to receive Mr. Dean’s monthly Social Security benefit payments. As a result, Mr. Dean filed suit against the IRS, pursuant to Section 7433, for damages in the amount of the Social Security payments accepted by the IRS after the statutory expiration date. However, the district court dismissed the claim, finding that the IRS’s continued receipt of Mr. Dean’s Social Security benefits was lawful. Mr. Dean subsequently appealed. In its decision to affirm, the Eleventh Circuit Court of Appeals held, in part:
Once the government has made an assessment of tax debt, it generally must collect such debt by levy or court proceeding within ten years after the assessment. 26 U.S.C. § 6502(a)(1). A levy made outside the statutory collections period generally must be released. 26 C.F.R. § 301.6343-1(b)(1)(i). And a continuing levy on salary or wages must be released at the end of the ten-year collections period. Id. But “a levy on a fixed and determinable right to payment which right includes payments to be made after the period of limitations expires does not become unenforceable upon the expiration of the period of limitations and will not be released under this condition unless the liability is satisfied.” Id. § 301.6343-1(b)(1)(ii).
The district court did not err in dismissing Dean’s complaint because the factual allegations in his complaint, taken as true, did not state a claim under § 7433. Dean’s complaint was based on his misapprehension of the legal effect of the expiration of the statutory collections period and the IRS’s release of its liens on his property. It is true that the IRS could not have issued a notice of levy seizing his Social Security benefit after the collection statute of limitations passed in 2017. But it did not do so. Instead, the IRS seized his entire Social Security benefit—that is, his “fixed and determinable right to payment” of his Social Security benefit in monthly installments—immediately upon issuing the notice of levy in June 2013. 26 C.F.R. § 301.6343-1(b)(1)(ii); see Phelps, 421 U.S. at 337, 95 S.Ct. 1728. Having seized his entire benefit before the expiration of the collection limitations period, the IRS was not required to relinquish it after the period expired. See 26 C.F.R. § 301.6343-1(b)(1)(ii). Thus, the district court did not err in disregarding Dean’s mistaken legal conclusions regarding the continuing viability of the 2013 levy, or in concluding that the remaining allegations in his complaint failed to state a claim for unlawful collection action by IRS employees.
The Dean decision underscores the breadth and severity of the IRS’s ability to collect on outstanding tax liabilities. True, the IRS must generally act within 10 years from the date the taxes are assessed and release levies made outside the statutory collection period. However, a levy on a “fixed and determinable right to payment” presents a unique problem for the taxpayer. To the extent the IRS issues a levy on a fixed and determinable right to payment prior to the collection statute expiration date (“CSED”), such levy may remain operative post-CSED. This, of course, presents the issue of whether a right to payment is “fixed and determinable.” That determination is based on the taxpayer’s facts and circumstances, including, for example, whether the right to payment is dependent upon the performance of future services.
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 See I.R.C. § 6331(e), (h).
 See I.R.M. pt. 22.214.171.124(2) (Feb. 15, 2018).
 I.R.C. § 6331(a)-(c).
 See Phelps v. United States, 421 U.S. 330 (1975); Treas. Reg. § 301.6331-1(a)(1).
 See I.R.C. § 6331(e); Rev. Rul. 55-210.
 Dean v. United States, No. 20-14421, 2021 WL 2689599, at *1 (11th Cir. June 30, 2021).
 Id. at *3.