Kovacs v. United States

Kovacs received a bankruptcy discharge of her debts in 2001. weeks later, the IRS notified her that it had applied part of her 2000 tax refund to her outstanding tax debts from tax years 1990 to 1995. Kovacs’s attorneys and the IRS went back and forth about the status of those debts, with the IRS claiming that Kovacs still owed more than $150,000. In 2003 IRS Officer Mulcahy informed Kovacs that the 2000 refund would be applied against her non-discharged 1999 tax debt. Despite that statement, the IRS sent Kovacs two letters, erroneously stating that Kovacs still owed more than $13,000 for 1990–1995; those debts had been discharged. Her attorneys wrote a note clarifying the status of the discharged debt in correspondence about Kovacs’s non‐discharged 1999 tax debt. In 2005, Kovacs filed an administrative claim against the IRS, under 26 U.S.C. 7430(b)(1) as a predicate to a lawsuit for violation of 11 U.S.C. 524(a). When the IRS did not respond, Kovacs filed a complaint. The IRS admitted its fault but argued that the two-year statute of limitations barred the action. After a third remand, the district court upheld the bankruptcy court’s $3,750 award and declared that the award was premised on litigation costs, not actual damages. The Seventh Circuit affirmed. View "Kovacs v. United States" on Justia Law