- 10 -
tax for 1997 (1997 overpayment).2 The statement indicates that
$11,270.34 is the “amount to be refunded to you if you owe no
other taxes or other debts we are required to collect.”
Petitioners subsequently received a refund check from the Federal
Government which they claim is evidence that all outstanding
Federal taxes are fully paid.
Respondent disagrees, contending that petitioners’ tax
liabilities for 1992, 1993, and 1996 remain outstanding.
Respondent argues that a refund check was sent to petitioners
despite their having outstanding tax liabilities because a lack
of mutuality precluded the IRS’s offsetting the 1997 overpayment
against the taxes owed.
Generally, section 6402(a) provides that the IRS has the
right to offset an overpayment against any outstanding tax
liabilities of the taxpayer. This right to offset is preserved
in a bankruptcy proceeding by 11 U.S.C. section 553 (2000),
Setoff, which provides in relevant part:
(a) Except as otherwise provided in this section * * *,
this title does not affect any right of a creditor to
offset a mutual debt owing by such creditor to the
debtor that arose before the commencement of the case
under this title against a claim of such creditor
against the debtor that arose before the commencement
of the case, * * *.
Respondent’s right to offset is subject to the mutuality
requirement under 11 U.S.C. section 553. See, e.g., Aetna Cas. &
2Taxable year 1997 is not at issue in this case.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: November 10, 2007