Tax Levy Notices
There are two types of Tax Levies. The 668-A and the 668-W.
The 668-A is a one time levy only, it is good on the date, received time and of levy/seizure. A 668-A is usually served on a Bank. It is only good on the day received and only applies to the bank balance at the time the levy is opened by the third party. Funds put in the bank the next day belong to the taxpayer.
The 668-W is a continuous levy and are usually served on wages. It sill not stop until a Release of Levy is served or given to the employer.
What is a Tax Levy ?
A Tax Levy is a legal seizure of any asset in the possession of a third party. This type of levy only takes into effect the time, date and place of service. IRS Tax Levy or tax levies with Form 668A are not continuous, they are a one time event. All monies in the account levied, on the day the levy hits, are frozen for 21 days. It is important to know that your account is not frozen, only the funds that were in the account on the day the levy hit are frozen. When the 21 day period is the funds that were frozen will be taken by IRS. This levy is the most common form of seizure that IRS uses.
The IRS Tax Levy, Form 668A basic content is the main address, to whom the levy is on, and to whom the levy is served. It is most important to discern, in the case of husbands and wives, the levy only applies to the taxpayer listed on the form 668A.
The body of the tax levy shows the tax years that are outstanding. In some cases the liability may be incorrect. It is important to match up your tax return with the actual notice of levy to make sure the notice is correct.
It should be noted that the levy notice does not attach fund’s in IRA’s, self-employed individuals retirement plans or any other retirement plan in the possession of a third party, unless the small block is signed. Most of the time, this block in never signed. If this is the case, the IRS levy or tax levies can be released instantaneously. Most people have no idea this is the case.
Also of importance, the amount that is owed on the levy has been computed to a date of three weeks after the date shown on the IRS tax Levy. Once that date expires the penalties and interest accrue on a daily basis.
IRS Levy collection on Third Parties – 668 A
IRS Tax Levy demands that the third party turn over all monies in their immediate possession within a 21 day period if you are a bank, credit union, savings or loan and similar institutions. If you don’t IRS will enforce sanctions. So there is no misunderstanding, if you are not one of the institutions listed above, you or you company should immediately turn over the money to the Internal Revenue Service for the tax levy or tax levies. The Internal Revenue Code also provides that Internal Revenue Service can file a Notice of Federal Tax Lien for the amount that is owed. The tax lien will be filed at the closest courthouse to your legal home residence. It is important that full documentation should be specified on the funds submitted so IRS can apply the money into the proper account and social security number.
Successive Levy / Seizures – 668 A
This Notice of Levy, Form 668A is a one time seizure. For IRS to continue this type of Federal Tax Levy, the Service must continue to file notice after notice. It is rare that IRS will issue successive levies of this type. These seizures are just a way for the IRS for the Service to get the attention of the taxpayer and work out an appropriate settlement. If a deal can be worked out, the IRS may send out a Notice of Release of the Federal Tax Levy or Levies. There are times in which the IRS only releases part of the funds due to the closing document.
Enforcement action if the demand is not satisfied by the third party. If the third party that received the levy notice does not turn over the said sum to the IRS, that third party is liable for the full amount of the sum withheld plus a 50% penalty. Also the IRS can enforce additional penalties and interest to the party in violation. If the third party does not pay IRS, they will the money one way or another. Just as a note, this is a very rare occurrence.
It should be noted that the IRS is not looking to seize property that belongs to anyone. They do so because of the non-compliance of the individuals not paying their taxes on time.
The IRS Notice of Levy on Wages, Salary, and other Income is a continuous levy or garnishment. It never stops until the IRS issues a notice of release of levy or the levy is completely removed.
Unlike its cousin the 668A, this levy forces the taxpayer to contact the IRS and settle their back taxes with Internal Revenue Service. Many times, the taxpayers just quit their job so the levy is no more enforced and lets IRS hunt they down all over again.
The Notice of Wage Levy has 3 main sections – 668W
The first section is the person to who it is addressed to and the person or company that it is sent to, along with the correct social security number.
The second section of the tax levy addresses the kind of tax, the periods and the balance that is due and owing the Internal Revenue Service. Taxpayers should make absolutely sure this amount is correct and it matches with there tax records. Do not assume IRS is right. Records should always be checked.
The third section of the tax levy deals with the terms of this levy. Many times the taxpayer no longer works at the source where the tax levy was sent. In that case, the third party recipient is asked to call IRS and send back the form indicating the taxpayer no longer works there. It is difficult for IRS is rare to follow up on this because they send out over 2.6 million tax levy or tax levies a year.
Wages available for the taxpayer – 668 W
To determine the amount of wages that are available for the taxpayer the employer is to give Parts 2,3,4, and 5, of the Levy Notice to the employee as soon as they receive the levy. The employer is required to send the taxpayers pay to the IRS minus the exempt amount for the employee. To claim any deductions the taxpayer is to fill out and return to the employer, within 3 days, the Statement of Exemptions and filing status on parts 3, 4, and 5. The instruction for completion on this form is found on page number 5. The employer may not claim new amounts of exemptions. You the employer are to forward the funds to IRS and continue to do so until IRS issues a release of the federal tax levy. This levy remains in effect for all benefits and retirement income if the taxpayer has a current fixed rights to future payments.
Instructions for figuring the amount exempt from this tax levy- 668 W
Usually enclosed with the Form 668W is publication 1494 which allows the employer to figure out how much income is exempt from this levy. The form is easy to follow and IRS puts everyone on the honor system to make sure the levy request is filled out correctly. If the taxpayer is 65 years of age, legally blind, extra amounts of deductions can be taken so take close note. Amounts allowed for court ordered payments should be taken into account.
