Tax Levy Payroll Deduction
The IRS has the ability to issue a Federal Tax Levy on a person’s wages to recover unpaid and overdue taxes. Employers are compelled to make these tax levy payroll deductions.
Tax Levy Payroll Deduction
When an employed person has run afoul of the IRS and owes back Federal Taxes, the IRS can issue a Tax Levy to the taxpayer’s employer. The tax levy requires the employer to deduct a certain amount from the employee’s wages until the levy is released. The IRS normally allows a certain exemption for living expenses and takes every thing in excess of the exemption.
There are several ways to release the tax levy payroll deduction. The most obvious is to pay the back tax and all related interest and penalties. However, it is also possible to negotiate a settlement with the IRS to make installment payments. The release of the payroll deduction must be a part of the settlement. The taxpayer can demonstrate that the imposition of the tax levy payroll deduction is creating a situation whereby the tax will be unlikely to be collected.
This might be the case due to a severe financially hardship as a result of the levy which makes continued employment impossible. This situation is a good starting point for a negotiated settlement with the IRS to release the payroll deduction. Some type of payment arrangement is going to need to be made as the IRS is not likely to forgive the debt simply because paying it has created a hardship. It is the mandatory and usually large payroll deduction where there might be some flexibility.
Once the Federal tax levy payroll deduction is established, the employee will not be able to make any changes to his exemption status or the status of his other deductions in most cases. On the other hand the Federal tax levy takes precedence over any other type of garnishment of your wages such as child support or a non-tax debt.
The Federal Tax levy can also be collected from your Social Security benefit payments, but the deduction is limited to around 15% of the amount of your benefit check. Lump sum benefit payments are also subject to the tax levy. The best way to deal with this issue is to not fall behind in your tax payments, of course, because the tax levy payroll deductions can be ruinous to your financial situation. It is always better to negotiate some type of settlement prior to it being put into force.