Individual Taxes: IRS Levy
IRS Levy
You or your bank received an IRS Tax Levy Notice. What do you do now? What does a levy notice mean to you? Why was it sent?
What is a Levy?
What you need to know
Some levies have a “one-time” effect, where the IRS takes an asset all at once.
A levy on your bank account takes only what is in the account at the time your bank receives the levy. The IRS must issue another levy if there are more funds in your account later.
Other levies have a continuous effect. They remain in place until the IRS releases the levy or your debt is paid in full. For example: If you have a levy on your wages or certain federal payments have a continuous effect.
A levy on your salary might take a portion of each paycheck until the IRS releases the levy – this is a continuous effect. By law, a portion of your wages is exempt from levy based on your filing status, additional standard deduction and dependents. To ensure the correct exemption amount is excluded from levy, your employer will ask you to complete a Statement of Exemptions and Filing status, Form 668-W, Part 3.
Your employer will use it (Form 668-W) to compute the exempt amount.
The IRS can also use the Federal Payment Levy Program (FPLP) to levy continuously on certain federal payments you receive such as Social Security benefits. Under this program, the IRS can generally take up to 15 percent of your federal payments (including Social Security), or up to 100 percent of payments due to a vendor for goods or services sold or leased to the federal government. A TAS brochure, What You Need to Know: The Federal Payment Levy Program can help you understand FPLP.
What can be done?
There are many options for negotiating adjustments, releases and formalized resolutins to deal with tax levies once they have been issued.