If your property is ever levied by the IRS, there may be relief if they determine that it was actually wrongfully taken from you. Usually the person that makes this determination is your Area Director within the IRS.
The IRS is authorized by regulations to return property to a taxpayer in the exact same position as before the levy had occurred. This means that if the asset were to decrease in value because of the levy, the IRS would have to pay you for the difference when they return the asset to you.
Wrongful Levy Regulations
These regulations apply to money that was levied and applied toward the taxpayer’s liability, money that the IRS received after disposing of the levied property and levied property that was taken out of accordance with IRS procedures that govern levy proceedings.
If the Area Director with the IRS determines that levy was wrongful, he has the authority to:
1. Return the property to the taxpayer if the property is still in possession by the IRS
2. Pay the taxpayer the amount equal to the property levied
3. Pay the taxpayer the amount equal to the amount received from the sale of the property levied
Levied property can be returned to the taxpayer at any time, however, if the property was already sold, the taxpayer must submit a request within 9 months of the wrongful levy to receive cash instead.
If the taxpayer must file a request with the IRS, they must do so by sending it to the IRS office and addressing it IRS Publication 4528 “ Making an Administrative Wrongful Levy Claim Under Internal Revenue Code (IRC) Section 6343(b)”. With the letter the taxpayer must state a detailed explanation of the property, why the taxpayer believes the property was levied wrongfully and the date the levy occurred.