Academic journal article Journal of Accountancy

Heavy Price for Ignoring Levy Notice

Academic journal article Journal of Accountancy

Heavy Price for Ignoring Levy Notice

Article excerpt

In U.S. v. MPM Financial Group Inc., the Sixth Circuit scolded the defendant for exercising poor internal controls as it upheld a penalty for failure to comply with a notice of levy against one of its employees, who was also the corporation's co-owner and president. Because the employer did not have "reasonable cause" for its failure to comply with the IRS notice, it was found liable for the amount in back taxes it failed to turn over, plus a 50% penalty under IRC section 6332(a)(2).

MPM appealed the ruling out of the Eastern District of Kentucky that found it liable for $29,233, plus the 50% penalty of $14,616, along with post-judgment interest. After the government's motion to reconsider the calculation, the judgment against MPM was increased to $77,058.

The notice of levy issued pursuant to IRC section 6332(a) was received by MPM's co-owner and president, Michael Morton, who was the delinquent taxpayer. Morton owed the IRS $104,009 in unpaid income taxes and penalties. In August 2000, MPM received the levy notice at its office via regular mail. The IRS agent assigned to the case later hand-delivered a "final demand" to Morton at MPM's office. No funds were paid to the IRS before the levy was released in June 2001.

MPM's other co-owners argued that the IRS agent knew Morton was uncooperative and untrustworthy, and that the agent should have tried to contact the company's other directors or mail a notice to the company's registered agent for service of process. …

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