
As an employer, when you receive a notice of levy from the federal government, you'll need to calculate the amount of the employee’s pay that can be withheld each pay period to satisfy the levy. The IRS exempts a certain amount of wages from withholding. To determine the exempt amount for an individual employee, you will need to know the employee’s W-4 marital status and allowances, as well as your payroll frequency.
Subtract taxes and existing child support garnishments from the employee’s gross pay.
Subtract all voluntary deductions already being withheld at the time the federal levy is received.
Look up the amount exempt from levy in lRS Publication 1494. First locate the table for the employee’s W-4 marital status. Once you have found the correct table, find your payroll frequency in the first column and read across to the column for the number of allowances the employee claims on Form W-4.
Subtract the result in Step 3 from the result in Step 2. The remainder is the amount you should withhold each pay period for the levy. Continue withholding this amount from each paycheck until the levy is satisfied or the IRS sends you a Form 688-D to release the levy. The IRS will send a notice of intent to levy directly to the employee.
Tips
Do not recalculate the amount exempt from levy if the employee changes their voluntary deductions or W-4 elections after the levy is in place,
Warnings
Follow the instructions on the levy you received, as federal law often changes.
References
- IRS.gov: Publication 1494
- Internal Revenue Service. "What is a Levy?" Accessed April 26, 2020.
- Consumer Financial Protection Bureau. "Can a debt collector garnish my bank account or my wages?" Accessed April 26, 2020.
- Consumer Financial Protection Bureau. "Can a debt collector take my Social Security or VA benefits?" Accessed April 28, 2020.
- GovInfo. "TITLE 26—INTERNAL REVENUE CODE," Pages 3303-3304. Accessed April 26, 2020.
- USA.gov. "Credit Reports and Scores." Accessed April 26, 2020.
- Internal Revenue Service. "Understanding a Federal Tax Lien." Accessed April 26, 2020.
- Internal Revenue Service. "5.17.2 Federal Tax Liens." Accessed April 26, 2020.
- Internal Revenue Service. "5.7.9 Federal Contractors." Accessed April 26, 2020.
- Taxpayer Advocate Service. "Levies." Accessed April 28, 2020.
- Federal Trade Commission. "Garnishing Federal Benefits." Accessed April 28, 2020.
- Internal Revenue Service. "Additional Information on Payment Plans." Accessed April 28, 2020.
- Internal Revenue Service. "Examples of General Tax Fraud Investigations - Fiscal Year 2015." Accessed April 28, 2020.
- Internal Revenue Service. "IRS Offers Options to Help Taxpayers Who Can't Pay." Accessed April 28, 2020.
- Internal Revenue Service. "How Do I Avoid a Levy?" Accessed April 28, 2020.
- Internal Revenue Service. "Collection Due Process (CDP) FAQs." Accessed April 28, 2020.
- Internal Revenue Service. "Let Us Help You." Accessed April 28, 2020.
- Internal Revenue Service. "Information About Bank Levies." Accessed April 28, 2020.
Tips
- Do not recalculate the amount exempt from levy if the employee changes their voluntary deductions or W-4 elections after the levy is in place,
Warnings
- Follow the instructions on the levy you received, as federal law often changes.
Writer Bio
Laurie Marie has a Bachelor of Science degree from San Francisco State University in business/accounting. She is a payroll industry veteran who assists large corporations as an independent payroll consultant. She specializes in writing payroll, consumer and lifestyle topics. Her articles have been published in the American Payroll Association Paytech magazine and on eHow.