The IRS Can Drive You Crazy

         Let’s face it, the IRS can drive you crazy. I don’t mean just us tax professionals, after all we get paid for the aggravation. You know some of us actually enjoy it. But when a client gets notice from the Internal Revenue Service even the toughest of them begin quaking in their boots. When representing these taxpayers of course the first course of action is to set forth a plan hopefully to negotiate an amicable conclusion. As a tax court judge once told me a good settlement should make both parties unhappy. But sometimes the IRS just won’t do it your way and for those cases referral to a bankruptcy attorney makes the most sense. Bankruptcy stops the IRS in its tracks to enforce collection. It can no longer badger the taxpayer by mail or any other type of communication. In that sense it is the same as any other creditor. What redress exists if the IRS doesn’t play by this rule? In Hunsaker (9th circuit) the taxpayers admittedly owed taxes but were forced to file bankruptcy. Notwithstanding this filing the IRS continued to send nasty demand letters which threatened immediate enforcement action. The taxpayers sued the IRS for emotional distress and a bankruptcy court ruled the IRS would have to pay the taxpayers… $4000. The District Court in late 2016 reversed on the grounds of sovereign immunity. But this Court of Appeals determined the District Court erred in dismissing the couple’s claims and sent the case back for a decision on the merits. Certainly this case is an aberration, but it does represent creative thinking on the part of their attorney.