Jennifer Zuch v. Commissioner of Internal Revenue, 97 F.4th 81

The IRS notified Jennifer Zuch of intent to levy for her 2010 unpaid tax; Zuch claimed she had already prepaid the tax through joint estimated payments with her ex-husband.
The IRS credited all estimated payments to her ex-husband’s account, not Zuch’s, despite her attempts—including an amended tax return and supporting statements—to have those payments applied to her 2010 tax liability.
Zuch challenged the levy through a Collection Due Process (CDP) hearing; the IRS Office of Appeals refused to reallocate the payments and sustained the levy.
Zuch petitioned the Tax Court for de novo review of the IRS's determination; while the case was pending, the IRS used Zuch’s subsequent tax refunds to offset the disputed liability, bringing her balance to zero.
The IRS then moved to dismiss the Tax Court case as moot; the Tax Court granted the motion, finding no unpaid liability remained to dispute.
Zuch appealed, arguing her fundamental right to contest the underlying tax liability was not extinguished by the IRS’s unilateral setoffs.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether IRS’s setoff of refunds can moot a pending Tax Court case	IRS can't moot her claim by unilaterally taking refunds & applying to disputed tax	Once levy and unpaid tax are gone, no live dispute	IRS cannot moot a case by setoff when liability is disputed
Whether challenge to payment allocation is challenge to liability	Credit misallocation is a challenge to underlying tax liability	Challenge is only to collection method, not liability	Credit misallocation is a challenge to liability
Tax Court jurisdiction over post-payment disputes in CDP hearings	Tax Court retains jurisdiction over liability even after payment	Jurisdiction ends when collection activity ends	Court retains jurisdiction to determine liability
Relief available without express refund jurisdiction in Tax Court	Determination of correct tax liability/credit has legal effect	Can’t order refund, thus no justiciable controversy	Court can decide liability; live controversy remains

Chafin v. Chafin, 568 U.S. 165 (live disputes must exist through all stages of litigation)
Knox v. Serv. Emps. Int’l Union, Loc. 1000, 567 U.S. 298 (case not moot if any effective relief is possible)
Citizens Bank of Md. v. Strumpf, 516 U.S. 16 (common law principles of setoff—cannot set off disputed debts)
Robinson v. Shell Oil Co., 519 U.S. 337 (statutory interpretation in context)
Mathews v. Eldridge, 424 U.S. 319 (due process requires hearing before deprivation of property)
United States v. Texas, 507 U.S. 529 (statutory construction presumes against abrogating common law)