CCA 200040033: Refund deadline applies to wage levy payments collected after tax was paid

Plain-English summary

The IRS asked whether it could refund wage levy payments collected after the underlying tax debt had been paid. The employer kept sending payments because the continuous levy had not been released. Chief Counsel concluded that section 6511's refund filing deadline still applies to those payments. The fact that the levy should have been released does not create an exception, so payments can be refunded only while the statutory period remains open. The advice highlights the need to check the refund deadline even when the IRS collected money after a liability was satisfied.

Ruling snapshot

• Question: Can payments collected under an unreleased wage levy after full payment be refunded after the section 6511 deadline?
• Outcome: Advice given; the refund limitation applies and bars late refunds.
• Key authorities: IRC § 6511(a), (b), (h); United States v. Brockamp, 519 U.S. 347 (1997).

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
I N T E R N AL R E V E N U E S E R V I C E WASHINGTON, D.C. 20224
August 1, 2000

Number: 200040033
Release Date: 10/6/2000
CC:PA:APJP:B3
TL-N-2551-00
UILC: 6343.00-00
6511.00-00

INTERNAL REVENUE SERVICE SIGNIFICANT SERVICE CENTER ADVICE

MEMORANDUM FOR BROOKLYN DISTRICT COUNSEL

FROM: Assistant Chief Counsel
(Administrative Provisions & Judicial Practice)

SUBJECT: Levies on Fully Paid Accounts

This Significant Service Center Advice responds to your undated memorandum and subsequent communications. This document is not to be cited as precedent.

ISSUE

Does the refund statute of limitations apply to payments received under a continuous wage levy that was not released after the liability underlying the levy was fully paid?

CONCLUSION

The refund statute of limitations does apply, and amounts collected after the liability is satisfied can be refunded only if not barred by the statute.

FACTS

The Service issues a continuous wage levy to a taxpayer’s employer for unpaid balances due. The employer sends periodic payments. These payments continue even after the underlying tax liability is paid, because the levy is not released. LAW AND ANALYSIS

Under I.R.C. § 6511(a), a taxpayer who files a claim for refund or credit of tax generally must do so no later than three years after filing the return required because of the tax or two years after paying the tax. Amounts collected by levy and amounts collected otherwise are subject to the same statutory limitations on credit or refund. These limitations are set out in I.R.C. § 6511(b). Although there are exceptions to the rules of I.R.C. § 6511(a) and (b) (see, for example, I.R.C.
§ 6511(h)), levy payments are not treated specially. No equitable exception applies to these payments. See United States v. Brockamp, 519 U.S. 347 (1997).

Accordingly, even if an amount is collected as a result of a continuous levy that should have been released because the underlying tax liability was paid, that amount cannot be refunded or credited once the period of limitations lapses. That the levy should have been, but was not, released does not override the mandates of I.R.C. § 6511.

Please call if you have further questions.

By:
SARA M. COE
Chief, Branch 3

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