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5.11.5.1 Introduction
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5.11.5.2 Employer Threatens to Fire Taxpayer Because of a Levy
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5.11.5.4 Exempt Amount
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5.11.5.5 Levy Payments
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5.11.5.6 Continuous Levy
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5.11.5.7 Defaulted/Terminated Systemically Monitored Levy Received in the Field
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An individual's wages, salary, and other income can be levied. Wages, salary, and other income include payment for personal services in a work relationship.
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Sometimes an employer threatens to fire an employee to avoid handling a levy. This might be a violation of 15 USC 1674.
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If the employer fires the taxpayer because of this, the employer might be fined not more than $1000 or imprisoned for not more than one year, or both.
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Refer the taxpayer to the Wage and Hour Division of the Department of Labor (DOL). DOL, not IRS, must decide if the employer violated the law.
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Unlike other levies, a levy on a taxpayer's wages and salary has a continuous effect. It attaches to future payments, until the levy is released. Wages and salary include fees, bonuses, commissions, and similar items. All other levies only attach to property and rights to property that exist when the levy is served.
Example:
If a bank account is levied, it only reaches money in the account when the levy is served. It does not reach money deposited later.
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When other income is levied, the levy reaches payment the taxpayer has a fixed and determinable right to. If the taxpayer's right to that payment is not dependent upon the performance of future services, then the levy will reach the future payments as well. Also see IRM 5.11.6.1, Retirement Income.
Example:
A Form 668-A is issued to levy an author's royalties. The author has a fixed and determinable right to royalties for books that have already been published. The levy reaches royalties for sales of those books in the future. The levy does not reach royalties for books that are written and published later. A new levy must be served to take those royalties.
Example:
A Form 668-W is issued to levy a taxpayer's retirement income. The taxpayer has a fixed right to the future payments; therefore, the levy remains in effect until it is released.
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Also, see IRM 5.11.6.12, Levy on Non-Liable Spouse in a Community Property State for guidance when the wage levy on the non-liable spouse is not continuous.
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Part of the individual taxpayer's wages, salary, (including fees, bonuses, commissions and similar items) and other income, as well as retirement and benefit income, is exempt from levy.
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The weekly exempt amount is:
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The total of the taxpayer's standard deduction and the amount deductible for exemptions on an income tax return for the year the levy is served.
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Then, this total is divided by 52.
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Income that is not paid weekly is prorated, so the same amount is exempt.
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In addition, the amount the taxpayer needs to pay court ordered child support is exempt.
Note:
The support order can originate from a court or administrative process under the laws and procedures of a state, territory or possession.
Reminder:
If support is allowed, the same child can not be claimed as an exemption for figuring the exempt amount. See IRM 5.11.5.4 (2)a above.
If
Then
The taxpayer has already shown proof of the required child support payment
Write on the levy form, "Under section 6334 (a)(8) of the Internal Revenue Code, $ ____________________is exempt from this levy."
The taxpayer shows proof of the child support after the levy is served
Release enough of the levy so the support can be paid.
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The taxpayer is not entitled to the support exemption unless the support is being paid.
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Consider getting the taxpayer to have the child support payment withheld and sent directly to the person with custody.
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Or, the taxpayer may make the child support payment through the Service, and the Service will forward the payment. When there is no open assignment, have the payments sent through Submission Processing. This may happen if the payments are being monitored in the campus.
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The Notice of Levy on Wages, Salary, and Other Income (Form 668-W) was developed for use when an individual may be entitled to the minimum exemption from levy in IRC 6334(a)(9) and includes a Statement of Exemptions and Filing Status. The employer gives the statement to the taxpayer to complete and return within three days. If it is not received by then, the exempt amount is figured as if the taxpayer is married filing separate with one exemption. The taxpayer can give the statement to the employer later to change the exempt amount.
Note:
The employer needs to use this statement rather than the employee's W–4, Employee's Withholding Certificate. Taxpayers may claim different exemptions for withholding from those claimed on their return.
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Publication 1494, Tables for Figuring Amount Exempt From Levy on Wages, Salary, and Other Income - Forms 668-W(ACS), 668-W(c)(DO) and 668-W(ICS), is sent with the levy to help figure the exempt amount.
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The taxpayer can give a new statement to the employer later to have the exempt amount recomputed.
Example:
The taxpayer's filing status or personal exemptions may change.
Example:
There may be a change in exempt rates in a new year.
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The statement is completed under penalty of perjury. Generally, accept the information on the statement, unless there is reason to question it. If exemptions are disallowed, notify the employer and the taxpayer in writing. The taxpayer can provide evidence that the statement is right and request managerial review. Include a statement that the taxpayer may provide evidence to prove the statement is accurate and may request a managerial review of the disallowance.
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Some employers have a centralized payroll, so the payroll is not handled where most employees work.
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Consider mailing the Statement of Exemptions and Filing Status directly to the taxpayer. This avoids the delay of the employer re-mailing it.
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Send to the employer Part 1 of the levy form and Notice 484, Instructions to Employer with Centralized Payroll for Processing Statement of Exemptions and Filing Status.
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Send to the taxpayer the other parts of the levy form and Notice 483, Instructions to Employee Paid through Central Payroll System for Submitting Statement of Exemptions and Filing Status.
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For joint liabilities, generally levy the income of the spouse with the larger income.
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Levy both incomes only in flagrant cases of neglect or refusal to pay. Secure group manager approval to issue notices of levy on the income of both spouses' living in the same household. If taxpayers are separated, consider collecting from both spouses' income rather than collecting from one spouse's income.
Note:
See IRM 5.11.6.2(6) for examples of flagrant cases.
If
And
Then
The taxpayers are filing as married filing jointly
Both taxpayers' incomes are levied
Only one of them can claim the standard deduction for figuring the exempt amount.
The taxpayers are filing with any other filing status
Both taxpayers' incomes are levied
Both can claim the standard deduction for their filing status.
The taxpayers are remarried and filing as married filing jointly with the new spouses.
Both taxpayers' incomes are levied
Both can claim the standard deduction for their filing status.
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When both spouses' incomes are levied, neither spouse can claim the other one as a personal exemption.
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Consider income from all sources when a taxpayer has more than one income source.
If
And
Then
The taxpayer is getting the exempt amount from one source of income that is levied
Another source of income is levied, too
Include Letter 1697(P)(CG) with the second levy to tell the employer not to allow any exempt amount.
If the taxpayer has a source of income that is not levied
That source of income is at least as much as the exempt amount
Letter 1697(P)(CG) can be included with a levy on another source of income to tell the employer not to allow the exempt amount.
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Use ICS templates to generate Letter 1697(P)(CG).
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A levy legally attaches the taxpayer's gross income minus the exempt amount; however, see IRM 1.2.14.1.6Policy Statement 5-29. By policy, a levy only attaches the taxpayer's usual take home pay.
Exception:
Voluntary deductions can be disallowed, if they are so large they defeat the levy.
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Generally, allow the taxpayer to maintain deductions they already have when the levy is served. Notify the employer and the taxpayer of deductions that must stop while the levy is in effect. The taxpayer can request managerial review.
Example:
If the taxpayer has a deduction for a savings account or used to buy shares in a mutual fund, this voluntary deduction should be stopped and those funds applied to the levy remittance.
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Generally, employers should not allow new voluntary deductions after receiving the levy. Exceptions can be allowed on a case by case basis, with the Service's approval.
Example:
The taxpayer cannot join the company insurance plan until on the job for six months. The levy is served before then. The amount of the premium is not unreasonable and is allowable.
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The taxpayer may leave a job and get severance pay.
If
Then
Severance pay is attributable to pay for a period of time
The exempt amount is based on that time period.
Severance pay is not attributable to pay for a period of time
The amount exempt for one pay period is used.
Example:
Severance pay is one week's pay for each year on the job. A taxpayer on the job for ten years gets ten weeks' severance pay. The taxpayer gets a paycheck every two weeks for ten weeks. Two weeks' exempt amount is subtracted from each check, just like the person was still working for ten weeks.
Example:
The same facts as above, but the taxpayer gets the amount in one payment. The payment is attributable to ten weeks' pay. The employer is just making an "advance" payment, instead of writing a series of checks. The taxpayer gets ten weeks' exempt amount.
Example:
A taxpayer gets a lump sum that is not attributable to a period of time. This could be, for example, an incentive payment to retire early. The exempt amount is based on the taxpayer's regular pay period. If there is no regular pay period, use one week's exempt amount. Similarly, if the taxpayer gets $1000 for each year on the job, this is not a ttributable to pay periods. A person getting $10,000 for being on the job ten years does NOT get ten years' exempt amount.
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This assumes the person is not already getting the exempt amount for a pay period at the same time. If both are being received, the taxpayer does not get the exempt amount twice.
Example:
The taxpayer is paid for both the last pay period worked and severance on the last pay day. The taxpayer only gets the exempt amount once.
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Credit levy payments on the date they are received. Apply the money in the most advantageous way to the government. Generally, apply it to the oldest assessment first. The taxpayer can not designate how to apply the money because this is not a voluntary payment.
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Surplus levy proceeds are an offset under IRC 6402(a) and therefore levy proceeds received, in excess of the periods covered by the levy, may be applied to liabilities not listed on the levy. If the periods listed on the original levy have been satisfied; and
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Any surplus proceeds have been applied to any liabilities that were not listed on the levy; and
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Liabilities remain outstanding for periods not covered by the original levy,
then release the original levy and prepare and issue a new notice of levy to the levy source for the remaining liabilities. Please note that all statutory requirements, such as the sending of a notice of intent to levy and a right to a hearing, must be met with regard to the new notice of levy if the taxpayer has not had an opportunity for a CDP hearing under IRC 6330 for the remaining liabilities. See IRM 5.11.1.2, Pre-Levy Actions for guidance regarding the pre-levy statutory requirements.
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Use designated payment code (DPC) 05 for levy payments. Use DPC 15 for other payments caused by a levy, if they are not levy proceeds.
Example:
A wage levy prompts the taxpayer to pay the amount owed to get the levy released. Code this payment with DPC 15.
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Because payments for levies on wages and salary may be small, determine if the amount owed should be paid from the levy proceeds. When the payments are small compared to the amount owed, though, consider other enforced collection.
If
And
Then
Payments are being monitored in CFf
One more payment is expected to pay off the amount owed
Use Form 668–D, Release of Levy/Release of Property from Levy, to give the employer a payoff figure and release the levy after that is paid.
At least two payments are received
No additional collection is warranted
Consider transferring the case for monitoring. Get managerial approval, first.
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Even though some continuous levies are monitored in status 60 on IDRS, they are not installment agreements. In order to ensure a distinction is maintained between a continuous levy and an installment agreement, it is important to follow the procedures in this subsection.
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If a productive levy source is the only source of collection, group managers should approve the monitoring of levy payments as continuous by signing Form 4844, Request for Terminal Action , after ensuring the procedures outlined below have been followed.
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The following types of levies can be monitored in a campus or Centralized Case Processing (CCP).
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Continuous levies on wages and salaries
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Levies that reach a taxpayer's fixed right to a series of future payments, e.g., benefit and retirement income. See IRM 5.17.3.4.2, Effect of Levy.
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If levy payments are received monthly, then transfer for monitoring after two consecutive levy payments have been received.
Note:
At local management option, accounts may be transferred after one remittance if payments will be of an equal amount and will be remitted monthly.
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If levy payments are received weekly or bi-weekly, then transfer for monitoring after 60 days.
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See IRM 5.1.11.7,Del Ret Closures, to close the ICS Del Ret module when the Bal Dues are to be resolved by a continuous levy,
Reminder:
Del Rets and Bal Dues in status 60 can coexist on IDRS. An entity can have an open Del Ret on one module and status 60 on other modules. Del Rets do not default status 60 Bal Dues.
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Prior to transferring for systemic or manual monitoring,
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Ensure the payor (levy source) understands the levy remains in effect after the transfer.
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Ensure the payor understands where to send the levy payment.
For a continuous levy that will be systemically or manually monitored, payments should be sent to the campus designated for the Area. See the Servicewide Electronic Research Program (SERP), Who/Where, Where to File – Forms and Payments, Campus Balance Due Accounts – Where to Send Payments,
http://serp.enterprise.irs.gov/databases/who-where.dr/balance_due_accounts.htm.
Use the State address listed under "Without the CP521/523 Notice." -
Instruct the payor that payments should be payable to "United States Treasury."
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Request the check or draft reflect the taxpayer name and identification number, the tax periods included on the levy form, and "Levy Proceeds."
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Wage levies that result in regular remittances of about the same amount, may be monitored systemically if the earliest CSED is later than 18 months. Request a review date:
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No more than five years in the future,
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18 months prior to the earliest CSED if the earliest CSED is at least 24 months in the future, or
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9 months prior to the earliest CSED if the earliest CSED is less than 24 months in the future.
Note:
If fewer than 18 months remain prior to the CSED, a continuous wage levy must be monitored manually.
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For all continuous levies, if the levy source sends payments on a weekly or bi-weekly (every two weeks) basis, the levy may be monitored systemically using the monthly total of these payments. In this situation, monitor payments for 60 days to ascertain the correct monthly total to be entered on the Form 4844, Request for Terminal Action . Do not close the case on ICS until the Form 4844 is submitted for input.
Note:
If payment amounts vary, use the lowest amount it is possible will be received monthly. That amount should not be less than $10.
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Do not input TC 971, AC 063 (Installment Agreement) on Bal Dues included in a continuous levy.
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Document the ICS case history with "Monitor Continuous Levy as IA."
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No TSIGN change is required for levy monitoring. Systemically monitored levies will be transferred to Compliance Service Collection Operation (CSCO) (formerly SCCB).
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Complete the ICS template version of Form 4844. Prepare to email the Form 4844 to management for approval and copy the Form 4844 into the ICS history. Include the following on Form 4844:
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Request for input of status 60;
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"Suppress Default and Payment Reminder Notices" ;
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The amount of the payment and the date it will be received;
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The frequency of the payment;
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The name, address, and telephone number of the employer/third party levied;
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The name, address, and telephone number of the payor office (location that sends payment) if different from e) above;
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"Input Installment Agreement Locator Number 0208" ;
Note:
Installment Agreement Locator Number 0208 identifies these accounts as continuous wage levies on the Installment Agreement Account Listing (IAAL) in the campus. Proper identification of these accounts may result in fewer field case issuances on defaults.
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For wage levies that will be released when the CSED expires, request input of TC 971, AC 687, misc. 002 for each module included in the continuous levy;
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For other continuous levies that reach a taxpayer's right to future payment and will not be released when the CSED expires, request input of TC 971, AC 687, misc. 001 for each module included in the continuous lev.
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Copy the Form 4844 into the ICS history. Email the completed Form 4844 to management for approval. The GM will email the approved Form 4844 to CCP and cc the requester.
Reminder:
Group manager approval is required. If there is no additional collection potential on the case, group managers should approve these transfers.
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After approval, choose "Contin. Levy ST60" in Installment Agreement, Option B-IA (ICS Closure Only) on ICS. Do not select the "Contin. Levy MMIA (CCP)" option.
Note:
Choosing " Contin. Levy ST60" in Option B under Installment Agreements on ICS will generate Form 3210, Document Transmittal, for transmitting the physical case file to CCP.
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Route the physical case file to CCP using the ICS generated Form 3210.
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CSCO will send Form 668-D, Release of Levy/Release of Property from Levy, one month prior to the account being full paid advising the employer of the amount to remit to full pay the levy.
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At the time of the review discussed in paragraph (1) above, campus Installment Agreement Account Listing (IAAL) personnel will:
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Attempt to secure an installment agreement to fully pay the taxes;
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Consider other avenues of collection such as offer in compromise or part pay installment agreement;
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Consider recommending the account(s) be reduced to a judgment.
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Some continuous levies cannot be transferred to CSCO for systemic monitoring in status 60. Transfer those continuous levies to Centralized Case Processing (CCP) for monitoring in the same way manually monitored installment agreements are monitored. The following types of accounts and levies must be monitored in CCP:
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NMF accounts;
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Accounts with a wage levy and fewer than 18 months remaining prior to the earliest CSED;
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Accounts with an unreversed TC 971, AC 065 (claim pending for joint and several liability relief under IRC section 6015);
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In-Business Trust Fund accounts;
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Levies with irregular payments dates;
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Levies with irregular payment amounts;
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Levies on a spouse whose SSN is not the Bal Due account TIN;
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Levies on seasonal employees unless payments will satisfy the Bal Dues.
Note:
Do not request manual monitoring of continuous FPLP payments. For guidance see IRM 5.11.7.2.5.1, FPLP or Paper Levy (Form 668-A/668-W).
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Do not input TC 971, AC 063 (Installment Agreement) on Bal Dues included in a continuous levy.
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Note the Bal Due account and document the case history, " Monitor Continuous Levy as IA."
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Complete the ICS template version of Form 4844. Prepare to email the Form 4844 to management for approval and copy the Form 4844 into the ICS history. Include the following on Form 4844:
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"Transfer to CCP for Manually Monitored Continuous Levy Payments" ;
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Date monthly payment will be received;
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Amount of monthly payment;
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Frequency of payments (monthly, bi-weekly, weekly);
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Name, address, and phone number of levy source;
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Name, address, and telephone number of payor if different from e) above;
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For wage levies that will be released when the CSED expires, request input of TC 971, AC 687, misc. 002 for each module included in the continuous levy;
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For other continuous levies that reach a taxpayer's right to future payment and will not be released when the CSED expires, request input of TC 971, AC 687, misc. 001 for each module included in the continuous levy;
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If fewer than 18 months remain in the statutory period for collection when the account(s) is being transferred to CCP and the levy will be released when the CSED expires, include the following statement "CSED = (insert date). No suit recommended."
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If a copy of the levy form is not available in the case file, document the case history accordingly.
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Copy the Form 4844 into the ICS history. Email the completed Form 4844 to management for approval. The GM will review the Form 4844 and return to the requester .
Note:
Do not email the Form 4844 to CCP for Manually Monitored Continuous Levies. The ICS assignment number is automatically updated. See "Note" in paragraph (7) below.
Reminder:
Group manager approval is required. If there is no additional collection potential on the case, group managers should approve these transfers.
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After approval, place a copy of the approved Form 4844 in the physical case file. Choose "Contin. Levy MMIA (CCP)" in Option B under Installment Agreements on ICS. Selecting this option will set the sub code to"902," the location field in the Name and Address will set to "LEVY."
Note:
Choosing "Contin. Levy MMIA (CCP)" in Option B under Installment Agreements on ICS will generate Form 3210, Document Transmittal, for transmitting the physical case file to CCP. ICS will automatically update the case assignment to CCP.
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Route the physical case file to CCP using the generated Form 3210.
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CCP will monitor continuous levies to ensure payments are received timely. If payments are not received, CCP will follow-up with the payor.
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CCP will send a notice of levy release one month prior to the account being full paid advising the payor of the amount due to full pay the levy. A notice of levy release will not be issued until:
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All Bal Dues for which the levy was made are full paid;
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The last CSED is about to expire so the wage levy is released far enough in advance that no payments are received for wages earned after the expiration of the CSED;
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One of the criteria in IRM 5.11.2.2,Releasing Levies, exists;
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For CSED cases assigned for monitoring, CCP will
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Not release the wage levy if one or more CSED expires, but other periods included on the levy are within the statutory period for collection;
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Monitor levy payments until all Bal Dues included on the levy are paid or the last CSED on a wage levy is about to expire, whichever comes first;
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Follow the procedures in IRM 5.11.5.6.2 , Systemic Monitoring of Continuous Levy Payments above if some Bal Dues are full paid or the CSED expires and the case now qualifies for systemic monitoring. Note on the copy of the levy form, "The following period(s) have expired CSEDs:" and list the applicable Bal Due periods.
Note:
If the levy form is unavailable, record this information in the case history and ensure a list of the tax periods on the original levy is included as well as the tax periods with expired CSEDs.
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Levy sources sometimes stop sending payments. This can be the result of intentional or unintentional actions by the taxpayer or the levy source. If the campus or CCP cannot resolve these cases, they may be transferred to the field for follow-up action.
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Once these cases are assigned to the field:
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Determine why the payments stopped;
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Follow manually monitored procedures if irregular payments are being received;
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Follow manually or systemically monitored procedures as appropriate if payments begin again.
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If the levy source is the same, a new levy form is not needed. Complete Form 4844 and state why no copy of the levy is being provided and the reason why the levy defaulted.
Example:
The taxpayer was ill for a month. Wages fell to below the exempt amount.
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If the third party refuses to comply with the levy, determine if issuance of Form 668-C, Final Demand, is appropriate. See IRM 5.11.2.1.9,Refusing to Comply with a Levy.
