Notice of Levy on Wages, Salary, and Other Income
If you receive a Notice of Levy on Wages, Salary, and Other Income (Forms 668-W(c) or 668-W(c) (DO)), you must withhold amounts as described in the instructions for these forms. Publication 1494, Table for Figuring Amount Exempt From Levy on Wages, Salary, and Other Income (Forms 668-W(c), 668-W(c)(DO), and 668-W(ICS)) 2006, shows the exempt amount. If a levy issued in a prior year is still in effect and the taxpayer submits a new Statement of Exemptions and Filing Status, use the current year Publication 1494 to compute the exempt amount.
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.
Sometimes an employer threatens to fire an employee to avoid handling a levy. This might be a violation of 15 USC 1674. If the employer fires the taxpayer because of this, the employer might be fined $1000. There may also be a one year prison term. The Wage and Hour Division of the Department of Labor (DOL), not the IRS, must decide if the employer violated the law.
Continuous Effect of Levy on Salary and Wages
Unlike other levies, a levy on a taxpayer's wages and salary has a continuous effect. It attaches future paychecks until the levy is released. Wages and salary include fees, bonuses, and commissions. All other levies only attach property and rights to property that exist when the levy is served.
When other income is levied, the levy only reaches money the taxpayer has a fixed and determinable right to.
Exempt Amount
Part of the taxpayer's wages, salary, and other income is exempt from levy. The weekly exempt amount is:
- 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.
- Then, this total is divided by 52.
- Income that is not paid weekly is prorated, so the same amount is exempt.
In addition, the amount the taxpayer needs to pay court ordered child support is exempt. However, the order must be before the date of the levy. If court ordered child support is applicable, the same child cannot be claimed as an exemption for figuring the exemptions amount.
Notice of Levy on Wages, Salary, and Other Income
Claiming the Exempt Amount
The Notice of Levy on Wages, Salary, and Other Income includes a Statement of Exemptions and Filing Status. The employer gives this to the taxpayer to complete and return within 3 days. If it is not received by then, the amount is figured as if the taxpayer is married filing separately 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. Publication 1494, Table for Figuring Amount Exempt From Levy on Wages, Salary, and Other Income, is sent with the levy to help figure the exempt amount. The taxpayer can give a new Publication 1494 to the employer later to have the exempt amount recomputed.
Example A: The taxpayer's filing status or personal exemptions may change.
Example B: There may be a change in exempt rates in a new year.
The statement is completed under penalty of perjury. Generally, the information on the statement is accepted by the IRS unless there is reason to question it. If it is disallowed, IRS will notify the employer and the taxpayer in writing. The taxpayer can provide evidence that the statement is right and request managerial review.
Taxpayer's Payroll Deductions
A levy legally attaches the taxpayer's gross income minus the exempt amount; however, 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. Generally, the taxpayer is allowed to maintain deductions they already have when the levy is served. The IRS will notify the employer and the taxpayer of deductions that must stop while the levy is in effect. The taxpayer can request managerial review.
Generally, employers should not allow new voluntary deductions after receiving the levy. Exceptions can be allowed on a case by case basis, with IRS approval.
The method that the taxpayer is paid is not relevant to take home pay. Direct deposit is not a payroll deduction.
Tables for Figuring Amount Exempt from Levy on Wages, Salary, and Other Income—(Forms 668-W(c), 668-W(c)(DO) and 668-W(ICS)).
Publication 1494 provides tables that show the amount of an individual’s income that is exempt from a notice of levy used to collect delinquent tax in 2008. (Amounts are for each pay period.)
The latest version of Publication 1494 can be found here: http://www.irs.gov/pub/irs-pdf/p1494.pdf.
