Third Circuit Court of Appeals Affirms Decision Against Taxpayer Whose Check Was Incorrectly Processed

Apr 24, 2012   

On April 19, 2012, the Third Circuit in the case of United States of America v. Zarra, case no. 11-3622, affirmed the decision of the District Court granting summary judgment in favor of the government.  A full copy of the decision can be found here.

The facts of the case are fairly straightforward:

The taxpayers owed the IRS $179,501 for 1999, and in order to pay that debt, executed a check in the amount of $179,501 payable to the IRS, but due to a bank error, only $179.50 was actually transferred to the IRS from the Taxpayers account.  In July of 2000 the IRS made an assessment for the balance, and in June of 2010, the government filed suit to collect pursuant to 26 USC 7403.

After filing suit, the government moved for summary judgment arguing that there was no genuine material facts regarding the Taxpayers underpayment.  The District Court agreed.  The Third Circuit affirmed noting that the tax was assessed in July 2000 and the IRS Form 4340 documenting the assessment date was “presumptive proof of a valid assessment.”

The teaching of Zarrra is that failure to pay the full amount due, even if it is a bank error, does not absolve a taxpayer from liability to the IRS. 

The attorneys at Fuerst Ittleman regularly represent taxpayers involved in complex disputes with the IRS.  You can contact us by calling us at 305.350.5690 or by email at