Irs Federal Payment Levy Program

By Author: Jeff Parrack
Total Articles: 4762
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IRS can collect unpaid income taxes by issuing levies on payments made by the government. Think about it. You owe them. They pay you. So they keep your money because they say it's really not yours. Depending on whether or not you owe back taxes, you may or may not agree with this policy. But the fact is that this is the way it works.

Here's a short list of government payments that are subject to IRS Levy or IRS Garnishment:
* many types of federal employees salary payments (W-2 payments),
* federal payments made to individuals working as contractors (1099 income) if you performed such work for the government
* Social Security payments made to retirees (SSA-1099),
* payments made to Medicare providers and suppliers
* retirement payments made to former federal employees

So if you are on the growing list of government payment recipients and you owe back income taxes, now you know that IRS can get that money. However, they will be limited to a maximum of 15% of each payment made to you. In the future, the IRS Federal Payment Levy Program will include other types of federal payments.

In ...
... many cases, however, government payments made to delinquent taxpayers will not be included in the program. These circumstances include bankruptcy; individuals who have claimed innocent or injured spouse protection with IRS; federal employees who have made other forms of payment agreements with IRS; or taxpayers who have been deemed Currently Non Collectible by IRS. The exact way this whole process occurs is a bit confusing, but what isn't confusing when the government is involved?

The IRS computer system periodically sends an updated list of delinquent accounts is transmitted to the Federal Management Service (FMS). The FMS part of the computer system will then match federal employees with federal employees who owe back taxes and then it will look for any kind federal payments that are due to be made to those people. Then when it finds a match, the IRS Computer System will mail out a CP 90 or CP 297 Letter titled Final Notice - Notice of Intent to Levy. This is also called a Thirty Day Letter because it gives you thirty days to respond.This letter starts the clock ticking.

After thirty days, if IRS has not been contacted by the taxpayer, a levy can go out at any time. Since the subject of this article is the IRS Federal Payment Levy Program, and since the IRS computer system is in control of this scenario, then the IRS computer system is programmed to electronically send out a levy to FMS. This means the levy will be sent out very quickly, so there is usually very little wiggle room after the thirty days expires. This applies to all federal payments that can be levied except for certain Social Security benefits, which are levied in a separate program. In some cases, a levy can be sent out to FMS even without a Thirty Day Notice if a taxpayer had asked for a Collection Due Process (CDP) hearing.

After the levy is sent out, FMS can then enforce the 15% levy on each and every payment that is made to a taxpayer until the entire amount of the back taxes is paid. If a taxpayer is a government contractor or vendor and is receiving payments from the government (for example, on a government contract), then the levy will be 100% of the payments until the total back taxes are paid in full or until some kind of payment arrangement is made between IRS and the taxpayer.
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