Supreme Court Backs Tax Court Move to End Woman’s Levy Suit (1)

The US Supreme Court 8-1 held Thursday that the US Tax Court properly dismissed a woman’s case over her tax levy after the IRS applied a tax refund from another year to the debt.

Writing for the majority, Justice Amy Coney Barrett said a determination of a taxpayer’s right to contest a levy under Internal Revenue Code Section 6330 “refers to the binary decision whether a levy may proceed.” Once the IRS applied Jennifer Zuch’s overpayments to her tax debt, there was no basis for a levy and no “determination” for the Tax Court to review, the justices said.

“The authority to issue injunctive relief against a levy necessarily includes the ability to make declarations about the validity of the tax obligations underlying it,” the majority said. “But not when there is no levy. Without a levy, the Tax Court has no authority to render such conclusions.”

But the court said Zuch still has the recourse to sue the IRS for a refund.

The decision is a blow to low-income taxpayer advocates, who had hoped the justices would expand the Tax Court’s authority to include jurisdiction over refund requests.

Zuch and her ex-husband made $50,000 in prepayments to the IRS, which they intended to apply to Zuch’s $27,000 debt. But the IRS diverted it to the ex’s separate balance. The IRS proposed a levy to satisfy Zuch’s remaining liability, which she challenged in the Tax Court.

The Tax Court deemed her case moot after the agency applied Zuch’s refund to the levy. The US Court of Appeals for the Third Circuit revived her case, setting up a circuit split with the Fourth and D.C. circuits. While the case’s larger due process questions have implications for the court’s workload, both sides conceded that there are a very small number of tax levy cases of this kind each year that could be impacted by the ruling.

In oral arguments April 22, Zuch’s counsel said the IRS “pulled the rug out” from under her when it applied a tax refund to a prior year’s debt, causing the Tax Court to dismiss her petition challenging that debt. It reversed and remanded the case back to the Third Circuit, ruling the Tax Court acted within its legal framework when dismissing the case.

Justice Neil Gorsuch dissented from the Supreme Court’s holding, saying the decision “hands the IRS a powerful new tool to avoid accountability for its mistakes in future cases like this one.”

“After today, §6330 proceedings are essentially risk-free for the IRS. It may pursue a levy and argue its case to the Tax Court,” Gorsuch wrote. “Then, if the Tax Court seems likely to side with the taxpayer, the IRS can drop the levy and avoid an unfavorable ruling on the taxpayer’s underlying tax liability.”

Skadden Arps Slate Meagher & Flom LLP and Agostino & Associates PC represented Zuch.

The case is Commissioner v. Zuch, U.S., No. 24-416, 6/12/25.