A couple in bankruptcy can sue IRS for damages for emotional distress.
They owed taxes, which IRS tried to collect. Even after they filed bankruptcy, IRS sent them repeated letters demanding payment and threatened enforcement action.
This was improper. The couple sued IRS for emotional distress, and a bankruptcy court ruled that the agency must pony up $4,000. A district court reversed in late 2016, saying sovereign immunity bars claims for emotional damages against IRS in this case.
The appeals court now says the district court erred in dismissing the couple’s claims and directed the district court to determine the case on its merits.
Hunsaker, 9th Cir.