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If you receive an IRS levy (order to seize) against one of your employees, vendors, customers, or other third parties, 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 tax levy (commonly called a garnishment) attaches to property or rights to the 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 (wage, bank, property).
Please read the instructions on the levy carefully.
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 will 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 forms) before they are required to send any funds from their employee’s wages to the IRS.
Encourage your employee to call Flat Fee Tax Relief (1-866-747-7435) as quickly as they can. That order to levy can be released in 24 hours. Do not let a good employee walk out on you unnecessarily.
The Internal Revenue Code allows for continuous levies with respect to wages, salaries, and certain other types of property. This means that an IRS levy on wages and salaries continuously attaches until it is released.
Examples of property continuously attached include:
a. Salary and wages, and
b. Deferred compensation payments, such as retirement or pension income
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, contact with the IRS will be necessary. This information cannot be released to the employer. It is always better to have an experienced tax practitioner call the IRS rather than the employee.
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 resolve their tax debt (Installment Agreement, IRS Hardship, Offer in Compromise). This is where an experienced IRS professional comes in.
Wage Levy Exempt Amount
In the case of an IRS levy on wages, the employer will pay the employee any amounts exempt from the tax levy. The IRS calculates the exempt amount based on the standard deduction and an “amount determined” calculated in part based on the number of dependents you are allowed for the year the levy is served.
IRS Publication 1494 PDF (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 the IRS levy. A levy includes a Statement of Dependents 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 no dependents (zero). 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 Dependents and Filing Status and ask their employer to re-compute the exempt amount.
Bank And Other Tax Levies
When the tax levy is on a bank, credit union, or similar account, the IRS Code provides for a 21-day waiting period before the bank must comply with the levy. This 21-day waiting period includes Saturdays, Sundays, and holidays. This doesn't give you much time to act.
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.
The Tax Attorneys at Flat Fee Tax Relief has been successfully obtaining IRS levy releases for more than a decade. Our IRS problem is skilled at saving paving paychecks from IRS seizures.