Code Sec. 7433: Damages Against the IRS for Wrongful Collection Actions

The hurdles that taxpayers must surmount in order to recover damages from the IRS in situations where the agency violates the collection rules of the Code or regulations are examined. When the IRS takes collection action in violation of rules in the Internal Revenue Code or Treasury regulations, the aggrieved taxpayer may be able to recover damages from the IRS under Section 7433. The Government wins the great majority of the Section 7433 cases that go to trial. The main stumbling blocks for taxpayer-plaintiffs are requirements as to: 1. nature of the IRS action, 2. source of the rule(s) violated, 3. standard of care, 4. exhaustion of administrative remedies, 5. mitigation of damages, 6. timing of the suit, 7. proof of damages and 8. standing to sue.