Most people think a tax debt is a tax debt. You owe the money, the IRS collects it, and that is the end of the story. But there is often more than one legal mechanism the government can use to collect the same dollars. Sometimes those mechanisms overlap.<\/p>\n
That overlap can create problems. Suppose the government sues to reduce a tax debt to judgment, then settles the lawsuit and gives the taxpayer a multiyear payment plan. Can the IRS turn around and levy on a separate assessment for the same debt to collect all of it right now? Or does the settlement lock the IRS into the schedule it agreed to?<\/p>\n
That is the question in White v. Commissioner<\/em>, T.C. Memo. 2026-56. The case gives us a chance to look at what happens when the government agrees to collect a tax debt one way and then tries to collect it another way.<\/p>\n The taxpayer was an electrical contractor. He earned substantial income over a decade. He eventually pleaded guilty to tax evasion<\/a><\/strong>. The court in the criminal case ordered him to pay restitution of about $1.2 million. This matched his unpaid income tax for those years as calculated at the time.<\/p>\n After the conviction became final, the IRS made what the tax code calls a restitution-based assessment<\/a><\/strong>. This let the IRS put the $1.2 million of restitution on its books and collect it as if it were a tax. So the taxpayer now had two sets of numbers on the IRS system for the same years. There were the original assessments from the returns he filed, and there was the restitution assessment from the criminal case.<\/p>\n Then the Department of Justice<\/a><\/strong> stepped in. It filed a civil lawsuit to reduce the taxpayer\u2019s unpaid income tax to judgment. By then, with interest, the balance had grown to about $1.9 million. The parties settled. The government agreed to treat the debt as fully satisfied, and to take no further collection action, if the taxpayer paid $1.6 million over roughly four years on a set monthly schedule. The last payment was due in July 2027. A federal court entered judgment on those terms. The taxpayer started paying and kept paying. By the time of this opinion he had paid almost $1 million.<\/p>\n You can start to see the issue here. While the taxpayer was making his agreed monthly payments, the IRS issued a notice of intent to levy<\/a><\/strong> to collect the unpaid portion of the restitution assessment, more than $1.1 million, all at once. The taxpayer requested a collection due process hearing. The settlement officer sustained the levy. The taxpayer petitioned the U.S. Tax Court<\/a><\/strong>, arguing that the levy was inconsistent with the deal the government had already struck.<\/p>\n When a taxpayer is convicted of a tax crime, the sentencing court can order restitution to the IRS for the tax loss<\/a><\/strong>. For a long time the IRS had to chase that restitution as a criminal debt, which was slow and cumbersome. Congress changed that. Under Section 6201(a)(4), the IRS can now assess the restitution amount and collect it \u201cin the same manner as if such amount were such tax.\u201d<\/p>\n This is not a new provision, but it still surprises people. It means a restitution order in a criminal judgment becomes a civil assessment the IRS can lien and levy against, just like any other tax. The IRS can only do this after the conviction and restitution order become final. And the taxpayer is barred by statute from challenging the restitution assessment on the ground that the underlying tax was wrong. That challenge belonged in the criminal case.<\/p>\n So the restitution assessment is a powerful tool. It gives the IRS a second, independent path to collect the same money the taxpayer already owed on his returns. The important word there is \u201csame.\u201d The restitution assessment in this case was identical in amount to the taxpayer\u2019s unpaid income tax for the same years. It was, in the court\u2019s words, simply \u201ca distinct mechanism for collecting those liabilities.\u201d<\/p>\n Before the IRS can levy, it usually has to give the taxpayer notice and a chance for a hearing. That is the collection due process, or \u201cCDP,\u201d hearing. At the hearing an Appeals<\/a><\/strong> settlement officer reviews whether the collection action is proper. If the taxpayer disagrees with the result, he can ask the Tax Court to review it.<\/p>\n The settlement officer does not have unlimited discretion. Section 6330(c)(3) requires the officer to do three things. Verify that the legal and procedural requirements were met. Consider the issues the taxpayer raises. And weigh whether the proposed collection action balances the need for efficient collection against the taxpayer\u2019s legitimate concern that collection be no more intrusive than necessary. That last requirement is the one that mattered here.<\/p>\n Because the taxpayer could not challenge the restitution assessment itself, the Tax Court reviewed the settlement officer\u2019s decision only for abuse of discretion. That is a taxpayer-friendly standard in name only. It usually favors the IRS. An abuse of discretion means the determination was arbitrary, capricious, or without a sound basis in fact or law. Taxpayers do not clear that bar very often.<\/p>\n The taxpayer\u2019s first argument was that collecting the restitution assessment by levy would result in double collection. He had already agreed to pay the $1.6 million on the DOJ schedule. Letting the IRS grab another $1.1 million by levy would mean paying the same debt twice.<\/p>\n The court noted that it can only be collected once. Sort of. The restitution assessment and the original return assessments are technically distinct liabilities. But the IRS cannot actually collect both. Any payment applied to the restitution assessment gets credited to the taxpayer\u2019s account for those same tax years. DOJ had said as much in the collection suit. It promised the court that any restitution payment would reduce the civil judgment so the government would \u201conly collect the unpaid tax liability once.\u201d So on the pure double-collection theory, the taxpayer lost as the court noted that it is collected only once. The money would only be collected once. But it would be the higher amount of the two.<\/p>\n That could have been the end of it. But the taxpayer had a second, better argument.<\/p>\n The stronger point was about timing and not the amount. The government had agreed to let the taxpayer pay his liabilities in monthly installments through July 2027. He was making every payment. By the time Appeals sustained the levy, his remaining balance under the settlement had dropped below $950,000. Yet the levy sought more than $1.1 million immediately.<\/p>\n The court found two problems. First, the levy amount exceeded what the taxpayer still owed under the settlement. Second, and more important, the levy would have let the IRS collect the entire remaining balance right now, when the taxpayer had a contractual right to pay it over the next two years. The settlement officer never mentioned the payments the taxpayer had already made. He never grappled with the schedule the government itself had agreed to.<\/p>\n By accelerating collection this way, the settlement officer\u2019s determination was fundamentally inconsistent with the deal DOJ had signed. It ran headfirst into the \u201cno more intrusive than necessary\u201d requirement. The government had already told a federal court it would take no further collection action if the taxpayer paid on schedule. He was paying on schedule. A levy for the whole balance was, by definition, more intrusive than necessary. The court held that the settlement officer abused his discretion, denied the IRS its summary judgment, and entered a decision for the taxpayer.<\/p>\n There is a nuance here that the court did not have to reach but that is important. The IRS took the position that the restitution assessment was \u201cseparate and distinct\u201d from the civil liability and therefore was not covered by the DOJ settlement at all. The court rejected that on the facts, because the two liabilities were identical in amount and the restitution assessment was just a collection mechanism for the same debt. <\/p>\n But the outcome might be different where a restitution assessment truly covers different years or different amounts than what the government settled. The lesson is that the identity between the restitution amount and the settled tax is what let the taxpayer tie the two together. A taxpayer negotiating a settlement while a restitution assessment is on the books should make sure the agreement expressly covers that assessment, and not assume the government will treat the two as one.<\/p>\n The government often has more than one way to collect the same tax. It can assess the return, it can reduce the debt to judgment, and after a criminal case it can make a restitution assessment. Those tools can point at the same dollars. This case shows that when the government commits to collecting a debt on a set schedule, it cannot use a different mechanism to grab all of it early. Once the IRS agrees to an installment schedule<\/a><\/strong> or a settlement, a later levy that accelerates the same debt can be an abuse of discretion. If you are paying under an agreement and the IRS moves to levy<\/a><\/strong> anyway, raise the inconsistency at the collection hearing. The deal you signed may be the thing that stops the levy.<\/p>\n In 40 minutes, we’ll teach you how to survive an IRS audit.<\/p>\n We’ll explain how the IRS conducts audits and how to manage and close the audit.\u00a0\u00a0<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div><\/div>\n\n","protected":false},"excerpt":{"rendered":" Most people think a tax debt is a tax debt. You owe the money, the IRS collects it, and that is the end of the story. But there is often more than one legal mechanism the government can use to collect the same dollars. Sometimes those mechanisms overlap. That overlap can create problems. Suppose the […]<\/p>\n","protected":false},"author":1,"featured_media":353991,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[97],"tags":[175144,19973,11265,12872,14221,10591,11160,7356,1231],"dealstore":[],"offerexpiration":[],"class_list":["post-353990","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-legal","tag-agreed","tag-attorneys","tag-debt","tag-houston","tag-irs","tag-levy","tag-payment","tag-tax","tag-time"],"yoast_head":"\nFacts & Procedural History<\/span><\/h2>\n
What Is a Restitution-Based Assessment?<\/span><\/h2>\n
How the IRS Collects, and What Limits It<\/span><\/h2>\n
Can the IRS Collect Twice for the Same Debt?<\/span><\/h2>\n
When a Settlement Ties the IRS\u2019s Hands<\/span><\/h2>\n
The Takeaway<\/span><\/h2>\n
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