Dear Tax Talk,
Recently the IRS put a levy on my joint account for $2,000. It was done in error and the IRS representative said it should not have been put on the account at all and the levy was lifted -- except for a $125 nonrefundable fee. I don't understand why the fee is paid by me for their mistake. I just don't understand what justice there is that the government can just take your money and then charge you a fee for it. Do I have any recourse?
--Dun Wronged

Dear Dun,
Some people would just be happy to have gotten the lien removed, but we live in a wonderful country that allows you to redress your issues with the government. While the IRS may file liens, it is not as quick as it once was to levy your property; in fact you pretty much have to be ignoring them for them to take the step of levying your bank accounts. A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt.

The IRS usually will levy only when the following three conditions have occurred:

• The IRS assessed the tax and sent you a "Notice and Demand for Payment,"
• You neglected or refused to pay the tax, and
• The IRS sent you a "Final Notice of Intent to Levy and Notice of Your Right to A Hearing" (levy notice) at least 30 days before the levy.

Seeing as you got past all those stages and still didn't avoid the levy, you're lucky to have gotten it released. If you still want your $125 bank charge returned, you can try filing Form 8546 with the IRS. In order to sustain your claim the following conditions have to be present:

1. The IRS acknowledges the levy was erroneous;
2. The taxpayers must not have contributed to the continuation or compounding of the error; and
3. Prior to the levy, the taxpayer did not refuse (either orally or in writing) to respond in a timely fashion to IRS inquiries or provide information relevant to the liability for which the levy was made.

Ironically, you'll need to attach copies of your bank statements showing the wrongful charges to the account. Of course, the IRS already knows about the account, so it shouldn't lead to any more problems.

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