Levy on Wages, Salary, and Other Income, income levy 2010.#Income #levy #2010

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income levy 2010

The taxpayers are filing as married filing jointly

Both taxpayers’ incomes are levied

Only one of them can claim the standard deduction for figuring the exempt amount.

The taxpayers are filing with any other filing status

Both taxpayers’ incomes are levied

Both can claim the standard deduction for their filing status.

The taxpayers are remarried and filing as married filing jointly with the new spouses.

Both taxpayers’ incomes are levied

Both can claim the standard deduction for their filing status.

When both spouses’ incomes are levied, neither spouse can claim the other one as a personal exemption.

5.11.5.4.4 (09-14-2010)

Taxpayers with More Than One Source of Income

Consider income from all sources when a taxpayer has more than one income source.

The taxpayer is getting the exempt amount from one source of income that is levied

Another source of income is levied, too

Include Letter 1697(P)(CG) with the second levy to tell the employer not to allow any exempt amount.

If the taxpayer has a source of income that is not levied

That source of income is at least as much as the exempt amount

Letter 1697(P)(CG) can be included with a levy on another source of income to tell the employer not to allow the exempt amount.

Use ICS templates to generate Letter 1697(P)(CG).

5.11.5.4.5 (09-14-2010)

Taxpayer’s Payroll Deductions

A levy legally attaches the taxpayer’s gross income minus the exempt amount; however, see IRM 1.2.14.1.6 Policy Statement 5-29 . By policy, a levy only attaches the taxpayer’s usual take home pay.

Exception:

Voluntary deductions can be disallowed, if they are so large they defeat the levy.

Generally, allow the taxpayer to maintain deductions they already have when the levy is served. Notify the employer and the taxpayer of deductions that must stop while the levy is in effect. The taxpayer can request managerial review.

Example:

If the taxpayer has a deduction for a savings account or used to buy shares in a mutual fund, this voluntary deduction should be stopped and those funds applied to the levy remittance.

Generally, employers should not allow new voluntary deductions after receiving the levy. Exceptions can be allowed on a case by case basis, with the Service’s approval.

Example:

The taxpayer cannot join the company insurance plan until on the job for six months. The levy is served before then. The amount of the premium is not unreasonable and is allowable.

5.11.5.4.6 (09-14-2010)

The taxpayer may leave a job and get severance pay.

Severance pay is attributable to pay for a period of time

The exempt amount is based on that time period.

Severance pay is not attributable to pay for a period of time

The amount exempt for one pay period is used.

Example:

Severance pay is one week’s pay for each year on the job. A taxpayer on the job for ten years gets ten weeks’ severance pay. The taxpayer gets a paycheck every two weeks for ten weeks. Two weeks’ exempt amount is subtracted from each check, just like the person was still working for ten weeks.

Example:

The same facts as above, but the taxpayer gets the amount in one payment. The payment is attributable to ten weeks’ pay. The employer is just making an advance payment, instead of writing a series of checks. The taxpayer gets ten weeks’ exempt amount.

Example:

A taxpayer gets a lump sum that is not attributable to a period of time. This could be, for example, an incentive payment to retire early. The exempt amount is based on the taxpayer’s regular pay period. If there is no regular pay period, use one week’s exempt amount. Similarly, if the taxpayer gets $1000 for each year on the job, this is not a ttributable to pay periods. A person getting $10,000 for being on the job ten years does NOT get ten years’ exempt amount.

This assumes the person is not already getting the exempt amount for a pay period at the same time. If both are being received, the taxpayer does not get the exempt amount twice.

Example:

The taxpayer is paid for both the last pay period worked and severance on the last pay day. The taxpayer only gets the exempt amount once.

5.11.5.5 (09-14-2010)

Credit levy payments on the date they are received. Apply the money in the most advantageous way to the government. Generally, apply it to the oldest assessment first. The taxpayer can not designate how to apply the money because this is not a voluntary payment.

Surplus levy proceeds are an offset under IRC 6402(a) and therefore levy proceeds received, in excess of the periods covered by the levy, may be applied to liabilities not listed on the levy. If the periods listed on the original levy have been satisfied; and

Any surplus proceeds have been applied to any liabilities that were not listed on the levy; and

Liabilities remain outstanding for periods not covered by the original levy,

then release the original levy and prepare and issue a new notice of levy to the levy source for the remaining liabilities. Please note that all statutory requirements, such as the sending of a notice of intent to levy and a right to a hearing, must be met with regard to the new notice of levy if the taxpayer has not had an opportunity for a CDP hearing under IRC 6330 for the remaining liabilities. See IRM 5.11.1.2, Pre-Levy Actions for guidance regarding the pre-levy statutory requirements.

Use designated payment code (DPC) 05 for levy payments. Use DPC 15 for other payments caused by a levy, if they are not levy proceeds.

Example:

A wage levy prompts the taxpayer to pay the amount owed to get the levy released. Code this payment with DPC 15.

Because payments for levies on wages and salary may be small, determine if the amount owed should be paid from the levy proceeds. When the payments are small compared to the amount owed, though, consider other enforced collection.


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