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Potential enforcement actions, once an
account has gone through the notice routine and has
accelerated to ACS, include the issuance of levies and the
filing of Federal Tax Liens. If the account meets certain
established criteria, the computer automatically issues a
levy when the account enters into the ACS system. If the account does not meet the set
criteria, our tax examiners review the information and may
manually issue either a bank or wage levy. Bank Levy When issuing a bank levy, a Form
668-A(c), Notice of Levy, is sent directly to the financial
institution. A Form 8519, Taxpayer's Copy of Notice of Levy,
is sent directly to the taxpayer. The financial institution
is required to freeze any account related to the taxpayer
named on the levy. Accounts will be frozen to levy monies up
to the full amount stated on the notice. Any funds greater
than the amount shown will be made available to the account
holder. Institutions may take 24 hours for this process. Any
funds deposited by the account holder after a Notice of Levy
is issued are not subject to that notice. A subsequent
Notice of Levy must be issued to freeze any subsequent
deposits. The financial institution will hold the funds up
to the full amount of the levy for 21 days before
transmitting to the IRS. This 21- day period allows
taxpayers to contact us and negotiate alternative solutions
to the outstanding balances. Wage Levy When issuing a wage levy, Form 668-W(c),
Notice of Levy on Wages, Salary and Other Income , is sent
to the employer. The employer is required to apply the
criteria from Publication 1494 to determine how much to
exempt from levy and how much to forward to the Service. The
employee is asked to complete parts 3, 4 and 5 of the Form
668-W(c). This establishes the employee's filing status and
exemptions. A wage levy stays in effect until IRS releases
the employer from this responsibility by issuing Form
668-D. Property Exempt From
Levy There are certain possessions and types
of income that are exempt from levy. Section 6334 of the
Internal Revenue Code gives a detailed explanation. The
common types of property or income exempt from levy
are: Release from Levy Generally, the policy on funds attached
by bank levy is to deny a request for the release of any
funds until the outstanding balance has been satisfied.
However, a couple of factors can be considered: Personal tax issues - If a "substantiated
hardship" exists, a partial release of funds may be
negotiated. Full releases are rarely approved. Business tax issues - If an imposed levy would cause the
taxpayer to miss a payroll or tax deposits, or some other
similar hardship exists, negotiating a partial release may
be possible. The taxpayer will be asked to provide
documentation to support the hardship request. Full releases for businesses are also
very rare. Evaluating Hardship Requests Taxpayers should
expect to provide supporting documentation showing how the
levy is causing hardship. A taxpayer or representative can
fax the information to the center. A manager will review the
information and make a determination. Tax examiners do not
have the authority to release any funds attached by bank
levy. However, telephone assistors may release a wage levy
if an alternative solution, most often an installment
agreement, is accepted. Liens Accounts coming into the ACS system may
be subject to the filing of a Federal Tax Lien. A statutory
lien for taxes is created by law under IRC Section 6321. The
lien is filed in order to protect the U.S.
governmentís interest when there is a balance due on
an account, and circumstances exist that may indicate such
protection may be warranted. A lien may be placed upon all
property and rights to property, belonging to the person
owing the taxes. A lien will include taxes due, interest,
penalties, and any costs that may accrue. Once filed,
all issues involving a lien are referred to the Special Procedures Function in the
appropriate district. A Federal Tax Lien is reflected on
a taxpayerís credit history for up
to ten years. Once satisfied, the Service forwards a request
to the County Clerk in the county of filing asking the
status of the lien be updated to "satisfied". All fees
charged by the state for both filing and releasing
Federal Tax Liens are paid by the taxpayer. IRS Restructuring and Reform Act of
1998 The IRS Restructuring and Reform Act of
1998 made several policy changes to levies and liens. The following highlights are brief
descriptions taken from the Commerce Clearing House (CCH) 1998 Tax Legislation: Law,
Explanation and Analysis. Section 266 IRS Levies Use of a "continuous levy", which
attaches both to property held on the date of levy and to
property or payments acquired after the date of levy,
is at the IRS's discretion and must be specifically approved
by the IRS before the levy takes effect.
This provision applied to levies issued after August 5, 1997. Section(s)
1201, 1206 ñ Approval of Liens and Levies ñ Written approval of the IRS
Chief Counsel or his delegate must be obtained as a
prerequisite for jeopardy and termination assessments or
jeopardy levies. Also, "where appropriate," revenue
officers must obtain a supervisor's approval
before issuing a notice of lien or levy against a taxpayer's
property. These provisions are effective after July
22, 1998. Section 1210 ñ Levy Exemption Amounts
ñ The levy exemption amount for a taxpayer's
personal effects has been increased from $2,500 to $6,250,
and the business or profession has been increased
from $1,250 to $3,125. These amounts will be adjusted
for inflation. This provision is effective
after July 22, 1998. Section 1214 Lien Exemption
Amounts The dollar amounts of certain "super
priority interests" that are exempt from federal tax liens
have been increased. For casual sales for amounts
under $1,000 with respect to household goods, personal
effects, or other tangible property, a lien is
invalid against a purchaser who lacks knowledge of the
lien. Mechanics' liens of $5,000 or less that
are related to repairs or improvements to a taxpayer's
personal residence have priority over a tax lien
on the residence. The exemption amounts will be adjusted
for inflation. This provision is effective
after July 22, 1998. Section 1218 ñ Release of Levy
ñ Under the Act, the IRS must, as soon as it is
practicable, release a wage levy once an agreement is made
with the taxpayer that his outstanding tax liability is
uncollectible (Code Sec. 6343(e), as added by the IRS
Restructuring and Reform Act of 1998. This provision is
effective for levies imposed after December 31,
1999. Section 1222 ñ Collection Barred
During Refund Proceedings ñ The IRS cannot collect
any unpaid "divisible tax" (amounts paid
periodically, such as employment taxes) by levy or court
proceedings while a refund suit for the paid portion
of the tax is pending. The prohibition does not apply if
the taxpayer executes a written waiver or if
collection of the tax is in jeopardy. This provision is
effective for tax periods beginning after December 31,
1998. Section 1226 - Levies on Retirement
Plans and IRAs The 10% tax on premature withdrawals from
employer-sponsored retirement plans or IRAs will
not apply to distributions after 1999 that
result from an IRS levy against the plan or IRA. Section 1230 Release of Erroneous
Lien A third- party owner of property against
which a tax lien has been filed may, as a matter of right,
obtain a certificate of discharge with respect to such lien
upon the posting security satisfactory to the
IRS. Such relief is not available to delinquent taxpayers.
This provision is effective after July 22,
1998.
