Taxpayer Rights at the Supreme Court: The Zuch Case and Due Process Protection

The U.S. Supreme Court recently heard oral arguments in a landmark case that strikes at the very heart of American taxpayers’ due process rights. In Zuch, the Court is grappling with a critical question: when the IRS satisfies a taxpayer’s debt through involuntary collection actions like refund offsets, does this render the taxpayer’s right to challenge the underlying liability meaningless?

The case originated from Jennifer Zuch’s dispute over how the IRS allocated estimated tax payments between her and her ex-husband, resulting in a balance due that she contested through the Collection Due Process (CDP) hearing system. While her challenge was pending in Tax Court for several years, the IRS systematically offset her tax refunds against the debt until it reached zero, prompting the court to dismiss her case as moot.

This decision has created a circuit split, with the Third Circuit ruling that such claims are not moot, while the Fourth and D.C. Circuits have held the opposite. As Darren J. Guillot, national director at alliant and former IRS Small Business/Self-Employed Division commissioner, analyzes in his comprehensive Tax Notes article, the implications extend far beyond this single case, particularly affecting taxpayers dealing with Employee Retention Credit recaptures and other assessments not subject to traditional deficiency procedures.

The Supreme Court’s decision will determine whether taxpayers retain meaningful due process rights to challenge tax liabilities even after the IRS has collected the disputed amounts through involuntary means—a ruling that could fundamentally reshape taxpayer protections and the balance of power between citizens and the tax collection system.