As a tax professional, it’s crucial to understand the IRS’s Federal Payment Levy Program (FPLP) and how it can impact clients who owe back taxes and receive federal income. This program allows the IRS to collect overdue taxes by levying certain federal payments. Here’s a breakdown of how the program works, your clients’ rights to appeal, and how you can assist them in resolving their tax liabilities.
Background on the Federal Payment Levy Program
The Federal Payment Levy Program, implemented in July 2000, allows the IRS to collect unpaid taxes by levying a percentage of federal payments disbursed through the Bureau of Fiscal Service. These levies are continuous until the tax debt is satisfied, meaning the IRS can take action until the amount owed is fully paid off.
Federal Payments Subject to the Levy
A variety of federal payments can be levied under the Federal Payment Levy Program, including:
- Federal employee retirement annuities;
- Payments to federal contractors (including DoD, Army Corps of Engineers, and USPS);
- Social Security benefits (in some cases);
- Federal salaries;
- Medicare provider payments;
- Railroad Retirement Board benefits, and/or;
- Military retirement benefits.
If your clients receive any of these payments, they may be subject to the program.
Notice Process: How It Works
Before levying a payment, the IRS will send a Final Notice of Intent to Levy (CP90 or LT11). This notice gives the taxpayer 30 days to file an appeal. The appeal can be submitted using Form 12153: Request for Collection Due Process or Equivalent Hearing. If filed on time, the levy process is suspended until the IRS Office of Appeals holds a formal hearing.
Exceptions to the Levy Suspension Process
In certain cases, the IRS may proceed with the levy without issuing a Final Notice:
- Employment taxes: If the taxpayer previously requested a Collection Due Process hearing for employment taxes within two years of the levy, the IRS may bypass the notice.
- Federal contractors: Contractors may receive a post-levy notice (CP90C, CP91, or CP297C) without a Final Notice.
How Much Will Be Levied?
Typically, the IRS will levy 15% of the federal payment or the exact tax amount owed if it’s less than 15%. This levy continues until the tax balance is paid in full. For some contract payments, the IRS may take 100% of the payment.
If your client receives multiple federal payments subject to levy, each can be levied. Furthermore, if a taxpayer files jointly, both spouses may be subject to levies.
Releasing the Levy: When Does It Happen?
The IRS can release the levy. In order to be released, the IRS will evaluate the financial circumstances of your client combined with the law outlined in the Internal Revenue Manual. It is critical that you or your client is up to date with the laws in the IRM regarding collection action. Remember, the IRS is the largest collection agency in the world. Their job is to collect as many taxes as possible, not to ensure that your client is in good financial health.
Even after the levy is released, relief may not be immediate. Since the Federal Payment Levy Program operates in processing cycles, it may take 1-2 payment cycles for the release to take effect. The timing depends on the type of payment and when the levy is released.
As a tax professional, you should set realistic expectations with your clients. If they are negotiating an installment agreement, this delay should be factored in when determining payment due dates.
How Community Tax Can Help Your Clients
If your clients are facing a federal payment levy, it can be overwhelming to navigate the process. As their tax professional, you have the ability to guide them through the steps to resolve their tax debt effectively.
At Community Tax, our team of CPAs, Attorneys, and Enrolled Agents specialize in helping taxpayers resolve back taxes and handle IRS levies. Whether through installment agreements, offers in compromise, or other resolution methods, we can help ensure that your clients get the best possible outcome.
If your client is receiving federal payments and facing tax liabilities, don’t let the IRS levy process take over their finances. Let Community Tax partner with you and prevent this issue from happening to your clients.
Editors: Theresa Speights, George Asimou.
As a tax professional, it’s crucial to understand the IRS’s Federal Payment Levy Program (FPLP) and how it can impact clients who owe back taxes and receive federal income. This program allows the IRS to collect overdue taxes by levying certain federal payments. Here’s a breakdown of how the program works, your clients’ rights to appeal, and how you can assist them in resolving their tax liabilities.
Background on the Federal Payment Levy Program
The Federal Payment Levy Program, implemented in July 2000, allows the IRS to collect unpaid taxes by levying a percentage of federal payments disbursed through the Bureau of Fiscal Service. These levies are continuous until the tax debt is satisfied, meaning the IRS can take action until the amount owed is fully paid off.
Federal Payments Subject to the Levy
A variety of federal payments can be levied under the Federal Payment Levy Program, including:
- Federal employee retirement annuities;
- Payments to federal contractors (including DoD, Army Corps of Engineers, and USPS);
- Social Security benefits (in some cases);
- Federal salaries;
- Medicare provider payments;
- Railroad Retirement Board benefits, and/or;
- Military retirement benefits.
If your clients receive any of these payments, they may be subject to the program.
Notice Process: How It Works
Before levying a payment, the IRS will send a Final Notice of Intent to Levy (CP90 or LT11). This notice gives the taxpayer 30 days to file an appeal. The appeal can be submitted using Form 12153: Request for Collection Due Process or Equivalent Hearing. If filed on time, the levy process is suspended until the IRS Office of Appeals holds a formal hearing.
Exceptions to the Levy Suspension Process
In certain cases, the IRS may proceed with the levy without issuing a Final Notice:
- Employment taxes: If the taxpayer previously requested a Collection Due Process hearing for employment taxes within two years of the levy, the IRS may bypass the notice.
- Federal contractors: Contractors may receive a post-levy notice (CP90C, CP91, or CP297C) without a Final Notice.
How Much Will Be Levied?
Typically, the IRS will levy 15% of the federal payment or the exact tax amount owed if it’s less than 15%. This levy continues until the tax balance is paid in full. For some contract payments, the IRS may take 100% of the payment.
If your client receives multiple federal payments subject to levy, each can be levied. Furthermore, if a taxpayer files jointly, both spouses may be subject to levies.
Releasing the Levy: When Does It Happen?
The IRS can release the levy. In order to be released, the IRS will evaluate the financial circumstances of your client combined with the law outlined in the Internal Revenue Manual. It is critical that you or your client is up to date with the laws in the IRM regarding collection action. Remember, the IRS is the largest collection agency in the world. Their job is to collect as many taxes as possible, not to ensure that your client is in good financial health.
Even after the levy is released, relief may not be immediate. Since the Federal Payment Levy Program operates in processing cycles, it may take 1-2 payment cycles for the release to take effect. The timing depends on the type of payment and when the levy is released.
As a tax professional, you should set realistic expectations with your clients. If they are negotiating an installment agreement, this delay should be factored in when determining payment due dates.
How Community Tax Can Help Your Clients
If your clients are facing a federal payment levy, it can be overwhelming to navigate the process. As their tax professional, you have the ability to guide them through the steps to resolve their tax debt effectively.
At Community Tax, our team of CPAs, Attorneys, and Enrolled Agents specialize in helping taxpayers resolve back taxes and handle IRS levies. Whether through installment agreements, offers in compromise, or other resolution methods, we can help ensure that your clients get the best possible outcome.
If your client is receiving federal payments and facing tax liabilities, don’t let the IRS levy process take over their finances. Let Community Tax partner with you and prevent this issue from happening to your clients.
Editors: Theresa Speights, George Asimou.
