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What To Do:
If you get a levy against one of your employees, vendors, customers, or other third party, you must turn over to the IRS any property you have that belongs to the person levied against.
The IRS uses the levy forms described below. Regardless of the IRS form used, a levy attaches to property or rights to property you hold that belongs to the person levied against.
In general, the IRS uses the levy form that contains the most appropriate instructions about how to comply with the levy.
• The IRS generally uses Form 668–W(ICS) or 668-W(C)DO to levy an individual’s wages, salary (including fees, bonuses, commissions, and similar items) or other income. Form 668-W(ICS) and/or 668-W(C)(DO) also provides notice of levy on a taxpayer’s benefit or retirement income.
• The IRS generally uses Form 668–A(C)DO to levy other property that a third party is holding. For example, this form is used to levy bank accounts and business receivables.
Employers generally have at least one full pay period after receiving a Form 668-W(ICS) or 668-W(C)DO, Notice of Levy on Wages, Salary and Other Income (or other levy form) before they are required to send any funds from their employee’s wages to the IRS.
Wage levies are continuous
The Internal Revenue Code allows for continuous levies with respect to wages, salaries and certain other types of property. This means that a levy on wages and salaries continuously attaches until it is released.
Examples of property continuously attached include:
• Salary and wages, and
• Deferred compensation payments, such as retirement or pension income
Amount owed
Levy forms include a “Total Amount Due.”
This amount is calculated through the date shown below the total amount due. Interest and any applicable penalties will continue to accrue after the date shown.
To get an updated payoff figure, the person who owes the tax liability will need to contact the IRS. This information cannot be released to the employer.
A continuous wage levy may last for some time. When all the tax shown on the levy is paid in full, the IRS will issue a Form 668-D, Release of Levy/Release of Property from Levy. The IRS may also release a levy if the taxpayer makes other arrangements to pay their tax debt.
Wage levy exempt amount
In the case of a levy on wages, the employer will pay the employee any amounts exempt from levy. The IRS calculates the exempt amount based on the standard deduction and the number of personal exemptions the employee is allowed.
IRS Publication 1494 (PDF), which is mailed with the Form 668-W(ICS) or 668-W(C)DO, explains to the employer how to compute the amount exempt from levy. A levy includes a Statement of Exemptions and Filing Status.
The employer gives this statement to the employee to complete and return within three days. If the employer does not receive the statement in three days, the exempt amount is figured as if the person is married filing separately with one exemption.
The IRS will notify the employer when the taxpayer is not entitled to levy exemptions.
If a wage levy continues from one calendar year to the next, the employee may submit a new Statement of Exemptions and Filing Status and ask their employer to re-compute the exempt amount.
Bank and other levies
When the levy is on a bank, credit union or similar account, the Internal Revenue Code provides for a 21-day waiting period before the bank must comply with the levy.
The waiting period allows the taxpayer time to contact the IRS and arrange to pay the tax or notify the IRS of errors in the levy.
Generally, IRS levies are delivered via U.S. mail. The date and time of delivery of the levy is the time when the levy is considered to have been made.
This means funds in the account are frozen as of the date and time the levy is received. Normally, the levy does not affect funds deposited to the account after the date of the levy.
If a release of levy from the IRS is not received within 21 days of receipt of the levy, funds in the account as of the date and time the levy was received must be sent to the IRS. Follow the instructions on the levy form for remitting levy payments.
