If the IRS decides to levy your wages, the agency will send Form 668-W to your employer. Generally, the IRS sends Forms 668–W(ICS) or 668-W(C)DO, and if your employer receives one of these forms, they are legally obligated to send the IRS funds from your wages, fees, bonuses, commissions, and other income.
If you’re facing a wage levy, you need to act quickly if you want to stop the levy. Ideally, you should get help before the IRS issues the levy. To help you out, here is an overview of what to expect if your employer receives Form 668-W. To get help now — contact us at The W Tax Group.
What Is Form 668-W?
Form 668-W is the form the IRS sends to employers when it wants to levy a taxpayer’s wages. The IRS also uses this form to create levies on pension and retirement funds.
Employer Compliance with Form 668-W
Employers must comply with the instructions on Form 668-W. If an employer ignores a wage levy request, they become personally responsible for the tax, penalties, and interest.
They will also incur a penalty of up to 50% of the tax owed. These strict laws ensure that employers and other payers comply with Form 668-W.
What to Expect If Your Employer Receives Form 668-W
If your employer receives Form 668-W, they must start withholding the required amount within 10 days. When your employer receives the form, they will give you paperwork to complete. You must return the paperwork to them within three workdays.
The paperwork allows you to make a statement about your exemptions and filing status, and your employer will use this information when figuring out how much to withhold from your paycheck. You should return these forms on time. Otherwise, your employer will withhold more of your wages than necessary.
Exempt Amounts from Wage Levies
Some of your wages are exempt from an IRS wage levy. The exempt amount is based on your filing status, the number of dependents, and pay frequency. If the IRS levies your wages, you will only be left with a very small amount to live on. The IRS’s financial standards are incredibly stringent.
As of 2022, the IRS only allows a single individual with no dependents to keep $1,079.17 per month. A married couple filing jointly with three dependents gets to keep $2,179.18 per month. All wages over these thresholds will be withheld and sent to the IRS.
You are not allowed to submit a new Form W4 when your employer receives a wage levy for you. This is the form you use to report your dependents so that your employer can withhold the correct amount of taxes from your paycheck.
However, every calendar year that the levy is in place, you can submit a new Statement of Dependents and Filing Status. Then, your employer will compute the levy amount based on the updated information. IRS Publication 1494 details the exempt amount based on different situations.
When Will the Wage Levy Be Released?
Wage levies are continuous. They stay in place until the tax liability is paid in full. When your employer receives Form 668-W, they will see how much you owe, but after that point, they will not be able to check on your balance due to privacy laws. You can contact the IRS to see how much you owe.
The IRS will release the levy when you pay off your tax liability in full. At that point, the IRS will send your employer Form 668-D. The IRS may also release the levy if you make arrangements on your tax liability or in the following situations:
- If the statute of limitations expired before the wage levy was served.
- If you provide proof that releasing the levy will help the IRS collect the taxes faster.
- If you enter into an installment agreement and the terms of the agreement allow the levy to be released.
- If you convince the IRS that the levy is creating a financial hardship.
Your employer cannot release the levy based on your instructions. The IRS must send the employer a notice to release the levy. If you need help getting a levy released, you should consult with a tax attorney.
Why Is There a Levy on My Paycheck?
The IRS will only levy your paycheck if you have a delinquent tax liability. A wage levy should not be a surprise. Before issuing a wage levy, the IRS must send you a Final Notice of Intent to Levy and Notice of Right to a Hearing. When you receive that notice, you have 30 days to request a Collection Due Process (CDP) hearing or make arrangements on your tax liability.
If you do not respond, the IRS may send Form 668-W to your employer. The IRS may also send Form 668-A to third parties to levy your bank accounts or levy payments from businesses that pay you as an independent contractor.
What Is Going to Happen If the IRS Sent a Letter to My Employer?
As explained above, your employer has to comply with an IRS wage levy. Employers do not ignore these requests because the penalties for not complying are severe. A wage levy can be professionally embarrassing, but your employer cannot fire or punish you because they received Form 668-W.
Note that federal law prevents employers from firing employees for one wage levy. However, federal law does not prevent your employer from taking action if you have multiple levies against you. In this case, you need to look at state law — some states follow federal law, while others extend additional protection to workers.
Get Help with Form 668-W
A wage levy can be financially debilitating but dealing with the IRS can be stressful. Many people ignore their tax situations because they simply don’t want to face the stress and confusion of dealing with the IRS. You don’t have to handle this issue on your own — we can help you.
The tax attorneys at The W Tax Group can help you deal with a wage levy or other tax concerns. To get help now, contact us today. We’ll start with a conversation and help you figure out the best steps forward.