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Notice of Levy in Special Cases | ||||||||||||||||||||||||||||||||||||||||||||||
| If | Then |
| The levy is received by the 15th of the month. | The first payment is sent on the first business day of the second month after that. |
| The levy is received after the 15th of the month. | The first payment is sent on the first business day of the third month after that. |
Example:
A levy is received on September 12. The first payment is sent on the first business day of November.
Example:
A levy is received on September 19. The first payment is sent on the first business day of December.
5.11.6.1.3 (06-20-2001)
Civil Service Retirement
- See Document 6408 for the address for these levies.
- If the civil service account number is known, include it on the levy.
- Expect the first payment in two to three months. See IRM 5.11.6.1.2(2).
5.11.6.1.4 (05-05-1998)
Railroad Benefits, Medal of Honor Winners, and
Annuities for Military Families and Survivors
- Certain annuity and pension payments are exempt from levy. See IRC 6334.
- The exempt payments
include:
- Railroad Retirement and Unemployment
- Special Pensions for Medal of Honor Winners
- Annuities under the Retired Serviceman's Family Protection Plan and Survivor Benefit Plan
5.11.6.2
(06-29-2001)
Funds in Pension or Retirement Plans
- These instructions cover money accumulated in a pension or retirement plan, as well as Individual Retirement Arrangements (IRAs). They do not deal with levying retirement income. See section IRM 5.11.6.1.
- There are many employer and
self-sponsored retirement vehicles that are not exempt from
levy. However, because these provide for the taxpayer's
future welfare, levy on the body of funds in a retirement
account (as contrasted with income from the account), only
in flagrant cases. These plans include, for example:
- Qualified Pension, Profit Sharing, and Stock Bonus Plans
- IRAs
- Retirement Plans for the Self-Employed (such as SEP-IRAs and Keough Plans)
- The taxpayer may be able to
withdraw money in a lump sum from a plan. If the taxpayer
has the right to do so, a levy can reach that right.
However, remember that a levy only reaches the taxpayer's
present rights.
Example:
The taxpayer has $10,000 in a plan but can only withdraw it later. The taxpayer may have a present right to the money, although it can not be withdrawn immediately. A levy may reach that right, but the money can be not paid over until the taxpayer can withdraw it. At that time, there may be $30,000 in the plan. Without a new levy, though, only $10,000 could be paid over.
- The notice of levy form
says it does not attach money in pension or retirement
plans. However, in an exception, these funds can be levied.
To do this, sign the Notice of Levy in the block to the left
of, "Total Amount Due."
Note:
If the Form 668–A revision date is before July 1992, there is no signature block for this. Instead, cross out the word "not" in the sentence to the left of, "Total Amount Due." Then, initial above this change.
- Have the SB/SE Compliance
Area Director approve the notice of levy. See IRM
5.11.1.2.4.
Note:
The Director of Compliance Services and the Director of Specialty Tax and Technical Support at Headquarters are also authorized to approve these notices of levy.
- Consider discussing the case with the Employee Plans Group before issuing the levy. Their advice, as well as advice from Technical Support and Associate Area Cousel, may be needed to determine the present right to property. Often, a levy is served before the taxpayer's precise rights are determined. Try to get a copy of the plan instruments as soon as possible to determine the taxpayer's interests in the plan.
- When money is withdrawn
from a retirement account, the taxpayer may be liable for
income tax on the withdrawal. If the taxpayer is less than
591/2 years old, there may also be 10
percent additional tax on early distributions. However,
there are several exceptions that can relieve the taxpayer
from the 10 percent additional tax on early distributions.
- On January 1, 2000, a new exception was added to the Internal Revenue Code. If the money was withdrawn, because a notice of levy was served on the retirement account, the taxpayer does not owe the 10 percent additional tax on early distributions. There may still be income tax owed for the amount withdrawn, however.
- Send Letter 3257 (DO) with the notice of levy and Letter 3258 (DO) with the taxpayer's copy of the notice of levy. These letters say that the withdrawal is not subject to the tax on early distributions, even if the taxpayer is under 59 1/2 years old. These letters are available as macros on the Integrated Collection System.
Example:
The taxpayer has money in a plan. The terms of the plan do not allow for any lump sum withdrawal. The plan provides a right in the future to receive monthly payments, but the taxpayer has not paid into it long enough yet to qualify for any future payments. A notice of levy attaches nothing, because the taxpayer has no present property rights.
5.11.6.2.1 (06-29-2001)
Thrift Savings Plan
- Federal employees may
contribute to the Thrift Savings Plan (TSP). Generally,
distributions cannot be paid from taxpayers' accounts
before they have left federal service, so there may be
no immediate right to withdrawn money from the TSP
account.
If Then The taxpayer is a current federal employee. The levy attaches to the taxpayer's TSP account. However, the TSP will not have to send money until the taxpayer could withdraw it. The taxpayer is receiving regular payments of money from the TSP. The levy attaches these payments. The taxpayer has left federal employment and still has funds in the TSP to continue growing. A levy attaches the taxpayer's account. - The TSP is administered by the Thrift Investment Board (TIB) which has contracted with the Department of Agriculture's National Finance Center in New Orleans to be the TSP record keeper. See Doc. 6408 for the address.
- TIB's position is that money in the TSP can not be levied. This includes funds that have accumulated in the Plan, as well as periodic payments that are being made to taxpayers. Counsel is discussing this with TIB's counsel. Because of this, get advice from Associate Area Counsel before issuing a levy to TIB.
5.11.6.3
(05-05-1998)
Insurance
- This contains instructions on insurance.
5.11.6.3.1 (05-05-1998)
Cash Loan Value of Life Insurance
- The cash loan value of life insurance and endowment contracts can be levied. The policy does not have to be surrendered. See IRC 6332(b).
5.11.6.3.1.1 (06-29-2001)
Serving the Levy
- Generally, do not
levy this if the taxpayer has:
- few assets,
- small income, and
- policies with a face value below $1000.
- Include these on
the levy, if they are known:
- policy number(s) and, "and any other policies this person owns on his/her life,"
- date of birth, or
- taxpayer's approximate age and spouse's name.
- The group manager or an Insolvency/Technical Support manager (second level or above) must approve the notice of levy. See IRM 5.11.1.2.4. See Document 6408 for addresses.
- The insurance
company does not have to turn over money until 90
days pass.
- Project accruals for this long.
- Above the taxpayer's name and address, write, "I certify that a copy of this notice was mailed on (insert date) to the taxpayer's last known address."
- Sign this statement.
- Mail Part 3 to the taxpayer before sending the levy to the insurance company.
5.11.6.3.1.2 (06-29-2001)
Payment for a Levy on the Cash Loan Value of
Life Insurance
- If the amount owed is paid before 90 days, send the insurance company Letter 980(DO) with a release.
- The taxpayer can ask the insurance company to pay before 90 days to save penalty and interest. A new payoff figure may be needed.
- If the amount is not paid within 90 days, send Letter 980(DO) to the insurance company. This tells them the amount still owed. Send the letter even if the amount has not changed.
- The insurance company must pay over the amount the taxpayer could have gotten as a loan. This is computed to the 90th day after the levy. Automatic premium loans and contractual interest is not paid over, if they keep the contract in force. However, an agreement to do this must be before the insurance company knew of the tax lien.
5.11.6.3.1.3 (06-29-2001)
Actual Knowledge of the Tax Lien
- The insurance company may have to pay more than the amount in IRM 5.11.6.3.1. Actual knowledge of the tax lien gives it priority over the insurance company if there are loans later. This means these policy loans (and contractual interest) must be paid over, too, if a levy is served.
- Give the insurance
company a copy of the lien or a letter to give
actual notice of the lien. This stops the taxpayer
from taking loans as equity builds up in the policy.
Note:
Do not try to give notice by serving a new levy. This starts the 90 day period again.
5.11.6.3.2 (06-29-2001)
Foreclosure on the Policy
- There is also a right to foreclose on the policy, if necessary. Consult withTechnical Support and Associate Area Counsel for advice. See IRM 5.17.3.5.11, Legal Reference Guide for Revenue Officers, for discussion of the differences between foreclosing on the policy to obtain the cash surrender value and levying to obtain the cash loan value.
5.11.6.3.3 (05-05-1998)
Veterans Administration Insurance Policies
- Dividends payable in
cash and the cash loan value of Veterans Administration
(VA) insurance policies can be levied.
Exception:
If the dividends are applied to pay future premiums, they can not be levied.
5.11.6.3.3.1 (05-05-1998)
Levy on Dividends of VA Policies
- Before serving a
notice of levy on VA insurance policy dividends, use
Form 2876 to get:
- Insurance File Number
- Policy Number
- Anniversary Date of the Policy
- Office that Pays Dividends
Note:
The P.O. Box for Philadelphia on Form 2876 is wrong. Use Box 42954, instead.
- Dividends are
payable on:
- United States Government Life Insurance Policies
- National Service Life Insurance Policies
- To levy dividends,
mail Form 668A(C)(DO) thirty days before the
policy's anniversary date.
- Write, "Levy is only on dividends," on the levy.
- Write, "Policy Number ______," above the taxpayer's name and address.
Exception:
Policies with a number preceded by RH do not pay dividends.
If the policy
number and file number and are different, write,
"Policy No. ______(File No. ______)," on the
levy.
Exception:
5.11.6.3.3.2 (06-29-2001)
Levy on Cash Loan Value of VA Insurance Policies
- Many VA insurance policies have cash loan value. This can be levied like other life insurance policies. Some policies are term life insurance. These have no cash loan value.
- Write, "Cash Loan Value: $ ______," in the Remarks block of Form 2876 to find out this amount. If the policy is term, VA will write, "Term Policy," in this space, instead of an amount.
- Write, "Levy is only against cash loan value," on the levy. Also, include the policy number. Use other procedures in IRM 5.11.6.3.1, above. For example, send Letter 980(DO) after 90 days.
5.11.6.3.4 (06-29-2001)
Insurance Company Employees
- To levy an insurance company employee's income, send Form 668W(C)DO. Write on the form that it is levying the person's income. This may prevent confusion between these and levies on policies.
- The addresses in Document 6408 may not be right for these levies. Contact the insurance company to determine where to send the levy.
5.11.6.3.5 (06-29-2001)
Death Benefits
- Death benefits from an insurance company or a government agency (Veterans Administration, Social Security Administration, etc.) can be levied. However, only use this source in flagrant cases. Consider whether the levy will cause a hardship and whether it may prevent the taxpayer from paying the funeral expenses of the person who died.
- Because of the
sensitive nature, have the SB/SE Compliance Area
Director approve the notice of levy. See IRM 5.11.1.2.4.
Note:
The Director of Compliance Services and the Director of Specialty Tax and Technical Support at Headquarters are also authorized to approve these notices of levy.
5.11.6.4
(05-05-1998)
Government Employees
- The income of federal,
state and local government officers and employees can be
levied. This includes:
- Civilian Employees
- Military Personnel
- Elected Officials
- Appointed Officials
- If the taxpayer increases
voluntary deductions after a levy is served, tell the
employer that this is not allowed.
Note:
Comptroller General's Decision B–45105 explains this to federal payroll offices. This decision is dated January 21, 1955, and amended April 18, 1955.
5.11.6.4.1 (06-29-2001)
Military Personnel on Active Duty
- A levy on the income of
active military personnel does not attach just wages and
salary. It also attaches:
- Payments for Quarters
- Subsistence
- Travel
- Clothing and uniform Allowances
- Personal Money and Overseas Allowances
- Reimbursement for Shipment of Household Goods
- Lump Sum Leave Payments
- Retirement Income (Including Disability Payments)
- Re-enlistment Bonuses
- Severance Pay
- Mustering Out Pay
- Savings Deposits
Exception:
See IRM 5.11.1.3.1(4).
- See Document 6408 for addresses to mail these notices of levy.
- Use Letter 1096(DO) to follow up on military levies.
- A response should be received to Letter 1096(DO) within 30 days. If not, call the finance center or send a new notice of levy.
- The taxpayer may pay the amount owed before the levy proceeds are received. If the release does not stop the proceeds in time, a payment for the levy will be received. Do not return the check to the finance center. Credit the money, so the overpayment will generate a refund. If a hardship exists, request a manual refund. See IRM 5.1.15.
| If | And | Then |
| The taxpayer is in the Air Force or Marines. | The taxpayer is on active duty or is in the reserves. | Include the taxpayer's military service address on the levy, if it is known, e.g. Andrews Air Force Base. |
If
Then
The
taxpayer is overseas.
Follow up
10 weeks after the levy is acknowledged.
The
taxpayer is in the United States, except
for Air Force.
Follow up
four weeks after the levy is
acknowledged.
The
taxpayer is in the United States and is
in the Air Force.
Follow up
eight weeks after the levy is
acknowledged.
5.11.6.4.2 (05-05-1998)
Military Class Q Allotments
- Class Q allotments are for dependents of military personnel. They can be levied to collect tax from the dependent.
5.11.6.4.3 (06-29-2001)
Health and Human Services Employees
- The Department of
Health and Human Services maintains a central payroll
office. See Document 6408. These payroll records
include:
- HHS in metropolitan Washington, DC
- HHS Regional Offices
- Public Health Service
- Food and Drug Administration
Reminder:
The Social Security Administration is no longer part of HHS.
- Send the Statement of Exemptions and Filing Status directly to the taxpayer. See IRM 5.11.5.4.2.
5.11.6.4.4 (06-29-2001)
Postal Service Employees
- For levies on postal
employees, include the following, if they are known:
- Postal Service Employee Number,
- Type of employment, and
- The town where the employee works, if it is different from where the employee lives.
- Do not send notices of
levy on postal employees to the address in the 11–1998
revision of Document 6408. Instead, send them to
U.S. Postal Service
Minneapolis Information Service Center
Involuntary Deduction Unit
2825 Lone Oak Pkwy.
Eagen, MN 55121–9650
5.11.6.5
(06-29-2001)
Federal Contractors
- Use Form 668A(C)(DO) to levy payments owed to federal contractors. The levy has no continuing effect. It only reaches payments owed to the contractor when the levy is received.
- The contract number must be
included on levies sent to the Defense Department. If the
number is known, include it on levies sent to other federal
agencies, too. This can help them find the contract and
honor the levy.
- Current federal contracts can be found on the Currency and Banking Retrieval System. Contract numbers are on the Federal Contract Information screen.
- Sources may also be found on IDRS using cc LEVYS. The contract number may appear on the levy source's name line after, "CONTRACT #." "FC" to the right of the number means this is a federal contract.
- See IRM 5.1, General Handbook.
- See Exhibit 5.11.6–1 for contract levy addresses at several agencies.
5.11.6.6
(05-05-1998)
Levy on Other Government Payments
- This contains instructions for levy on other government payments.
5.11.6.6.1 (06-29-2001)
Medicare Payments
- Levy Medicare payments only in flagrant cases. Use Form 668A(C)(DO).
- An insurance company is an intermediary or carrier contracting with Health Care Financing Administration (HCFA). The insurance company makes the Medicare payments. Serve the levy on this company, and send a copy to the HCFA Regional Office. See Document 6408 for the Regional Office addresses.
- Payments are made directly to hospitals, home health agencies, and extended care facilities. Doctors and other medical services and supplies can be paid directly, too. However, the beneficiary may pay these and get reimbursed by Medicare, later.
- The compliance territory manager or a second level Insolvency/ Technical Support manager must approve the notice of levy. See IRM 5.11.1.2.4.
5.11.6.6.2 (05-05-1998)
U.S. Savings Bonds—Series H Interest Payments
- Series H savings bonds pay interest semi-annually.
- To levy the interest,
use Form 668W(C)(DO). See Document 6408 for the address
to mail these levies. With the levy, send a copy of the
lien. Also, send a letter with the levy. Include in the
letter:
- bond series,
- serial number(s),
- bond denomination(s), and
- bond issue date(s).
5.11.6.6.3 (05-05-1998)
Agricultural Stabilization and Conservation Service
(ACSC) Payments
- Serve levies on ACSC
county offices to attach these payments.
If And Then The taxpayer is eligible for payment. ACSC is authorized to pay the taxpayer. A levy payment will be sent. The taxpayer is eligible for payment. ACSC is not authorized to pay the taxpayer, yet. ACSC will complete the back of the levy, to say when and how much the taxpayer will get. When a payment is authorized, ACSC will send the amount the taxpayer was eligible for on the date of the levy. No new levy is needed. The taxpayer is not eligible for payment. ACSC will send the levy back saying no money is owed. If they know when the taxpayer will be eligible, they will say so. Then, another levy can be served, later.
5.11.6.6.4 (06-29-2001)
Relocation Act Payments
- Relocation Act payments
pay for displaced people's:
- moving costs,
- related expenses, and
- cost of replacement housing.
- Levy these payments only in flagrant cases. The compliance territory manager or a second level Insolvency/Technical Support manager must approve the notice of levy. See IRM 5.11.1.2.4.
5.11.6.6.5 (05-05-1998)
Fees for Attorneys of Social Security Claimants
- Records of attorneys
for Social Security claimants are with the claimant's
files. To levy an attorney's fees, attach a list of
claimants' names and SSNs. If the SSNs are not known,
give anything else to identify the claimant.
Example:
Include the claimants' address and date of birth, if these are known.
- Avoid sending these levies without claimants' SSNs. SSA's files, like those of IRS, are very large. There are many people with the same name.
- A separate levy is not needed for each claimant's fees.
5.11.6.6.6 (06-29-2001)
Restitution Payments for Japanese Internment in
World War II
- The Civil Liberties Act of 1988 authorizes payment to people of Japanese ancestry interned in World War II. Each eligible person may receive $20,000.
- These payments are not exempt from levy. However, the payments are restitution for injustices that were done. Levy the payments only in flagrant cases.
- Have the SB/SE
Compliance Area Director approve the notice of levy. See
IRM 5.11.1.2.4.
Note:
The Director of Compliance Services and the Director of Specialty Tax and Technical Support at Headquarters are also authorized to approve these notices
of levy.
5.11.6.6.7 (06-29-2001)
State Income Tax Refunds
- In many states, computer tapes of IRS liabilities are matched with state refund tapes. The state tax agency sends payment with a list (or tape) of taxpayers whose refunds were taken.
- Payments posted before 2000 used designated payment code (dpc) 04. Starting in 2000, these payments use dpc 20 for systemically applied payments and dpc 21 for manually applied payments. If the taxpayer says a state refund paid the amount owed, check IDRS for the payment. If it has not posted, ask for a copy of the state's letter showing the refund was taken. If the refund only pays part of the amount owed, collect the rest.
- Correspondence letter 2167C on IDRS is used to respond to inquiries about these levies.
5.11.6.7
(05-05-1998)
Receivables
- Receivables and other debts owed to the taxpayer can be levied.
- A notice of levy reaches future payments, only if the taxpayer already has a right to them.
- If receivables can be sold, consider seizing and selling them.
5.11.6.7.1 (05-05-1998)
Billing Services
- Some taxpayers use
billing services for receivables. The service may only
prepare bills, or it may also receive payments.
If Then The billing service only prepares and sends bills. Use a summons or Form 2270 to get records of the taxpayer's receivables, so they can be levied. The billing service receives payments and forwards them to the taxpayer. Serve a levy on the billing service. - Tapes may include records of many of the billing service's customers. Use a summons or Form 2270 to get only the taxpayer's records. The ten day response period for summonses may need to be extended to get the records extracted.
- The billing service may deduct a fee and send the difference to the taxpayer. In this case, this is all the service needs to pay for the levy. If it normally sends the entire receivable to the taxpayer, then this should be paid in response to the levy.