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IRS Mission:

Provide America’s

taxpayers top quality

service by helping them

understand and meet

their tax responsibilities

and by applying the tax

law with integrity and

fairness to all.

What You Should Know About

The IRS Collection Process

Keep this publication for future reference Publication 594

If our records show that you owe us, we usually send this

publication with your final bill. If you owe the tax shown on

the bill we sent to you, please arrange to pay it immediately.

If you believe the bill is incorrect, call us now so that we may

correct the mistake. We urge you to settle your tax account

now so that we don’t have to take any further action to

collect the taxes you owe.

This publication tells you the steps the Internal Revenue Service (IRS) may

take to collect overdue taxes. This publication includes a summary of your

rights and responsibilities concerning paying your federal taxes.

Inside you will find a number of titles of IRS forms and publications that

apply to the various situations discussed. For a complete list of these documents,

see page 12. For copies of these documents, please call us, write to us, visit

your local library or IRS office, or contact us at our web site. See the next page

for the phone numbers and addresses that you’ll need. Please contact us right

away; we will work with you to solve your tax problem.

Please note that the information in this document applies to all taxpayers —

for example, individuals who owe income tax and employers who owe

employment tax. At the end of this publication, we’ve included a separate

section for special rules that apply to employers only.

This document is for information only. Although it discusses the legal

authority that allows the IRS to collect taxes, it is not a precise and technical

analysis of the law.

en español

Existe una versión de esta publicación en español, la Publicación 594SP, que

puede obtener en la oficina local del Servicio de Impuestos Internos.

Department of the Treasury

Internal Revenue Service

www.irs.gov

Publication 594 (Rev. 5-2002)

Catalog Number 46596B
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What’s inside. . .

Important Information You Should Know ...... 3

If you disagree with our decisions .............................. 4

If you want someone to represent you ........................ 4

Other items to note ..................................................... 4

What to Do When You Owe Taxes .................. 5

Pay your taxes — or tell us why you can’t ................. 5

If you cannot pay all that you owe now,

there’s still something you can do .............................. 5

Set up an installment agreement ................................. 6

Apply for an Offer in Compromise ............................ 6

Temporarily delay the collection process ................... 6

About IRS Collection Actions ......................... 7

Liens .............................................................. 7

Releasing a lien ....................................................... 7

Payoff amount ......................................................... 7

Applying for a discharge of a lien .......................... 8

Making the IRS lien secondary ............................... 8

Withdrawing liens ................................................... 8

Appealing the filing of a lien .................................. 8

Levies ............................................................. 8

Levying your wages or your bank account ............. 9

Filing a claim for reimbursement ........................... 9

Levying your federal payments .............................. 9

Releasing a levy ...................................................... 9

Releasing your property .......................................... 9

Returning levied property ..................................... 10

Selling your property ............................................ 10

Redeeming your real estate ................................... 10

Employment Taxes for Employers ............ 11

Assessing the trust fund recovery penalty ............ 11

Figuring the penalty amount ................................. 12

Appealing the decision ......................................... 12

❒ Boxed highlights

What if you believe your bill is wrong? ...................... 4

There is a special program to help you

with tax problems that cannot be resolved .................. 5

Some property cannot be levied or seized ................. 10

Especially for employers ........................................... 11

We offer you a number of free publications

and forms ................................................................... 12

Do you have questions or need

help right away? Call us.

We’re here to help you.

For tax information and help:

Call the number on the bill you received

or call us toll free at:

1–800–829–1040

1–800–829–4059 / TDD

For tax forms and publications:

1–800–829–3676

1–800–829–4059 / TDD

Internet: www.irs.gov

FTP — ftp.irs.ustreas.gov

Telnet — iris.irs.ustreas.gov

You’ll find answers to frequently

asked tax questions, tax forms online,

publications, hot tax issues and news,

and help through e-mail.

If you prefer to write to us. . .

Enclose a copy of your tax bill.

If you do not have a copy of your

bill, print your name, social security

number or taxpayer identification

number, and the tax form and period

shown on your bill. Write to us at the

address shown on your tax bill.

You can also visit your nearest

IRS office.

You’ll find the exact address in

your local phone book under

U.S. Government.

?
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What to Do When You Receive a Bill from the IRS

Avoid Having Overdue Taxes Next Year

➧ If you owe taxes because you did not have enough money withheld from your wages, you should claim a lower

number of withholding allowances on your W-4 form. See Publication 919, Is My Withholding Correct?

➧ If you are self-employed and owe tax, increase your estimated tax payments. See Publication 505, Tax

Withholding and Estimated Tax.

➧ If you are an employer, see Publication 15, Circular E, Employer’s Tax Guide.

Contact us right away. . .

You have several payment options. . .

Pay the full amount now

See page 5

Pay in monthly installments

See page 6

Apply for an Offer in

Compromise

See page 6

Seek a temporary delay

See page 6

If it is correct. . . If it is not correct. . .

Gather copies of:

❒ the bill

❒ any records

❒ tax returns, and

❒ canceled checks

Pay the full amount now. . .

Or. . .

Write to us at the

address on your bill

You receive a

tax bill in the

mail

Visit

your

local IRS

1–800–829–1040 office

1–800–829–4059/TDD

STOP

Important Information You Should Know

You have the right to be treated professionally, fairly,

promptly, and courteously by IRS employees. Among

other things, you have the right to:

➧ disagree with your tax bill,

➧ meet with an IRS manager if you disagree with

the IRS employee who handles your tax case,

➧ appeal most IRS collection actions,

➧ transfer your case to a different IRS office if you

have a valid reason,

➧ be represented by someone when dealing with

IRS matters, and

➧ receive a receipt for any payment you make.

For details about your rights, see Publication 1,

Your Rights as a Taxpayer. You received a copy of it

with your first bill.
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If you disagree with our decisions. . .

Fast Track Mediation Process

If you disagree with any or all of the IRS findings, you may

request the Fast Track Mediation services to help you

resolve disputes resulting from collection or examination.

The Fast Track Mediation offers an expedited process with

a trained mediator, who will help facilitate communication,

in a neutral setting. The mediator will work within the

law to resolve the issues, but does not have the authority

to require either party to accept the resolution.

Most cases qualify for the Fast Track Mediation. To

begin the process, you may request the IRS representative

to arrange a mediation meeting. Both you and the IRS

representative must sign a simple agreement to mediate

form. The IRS representative will send the signed agreement

to the local Appeals Office, which will assign a mediator.

Generally, within a week, the mediator will contact you and

the IRS representative to schedule a meeting. The mediator

will give you a brief explanation of the Fast Track Mediation

process and set up a mutually agreeable time and place to

hold your mediation session.

For additional information, refer to Publication 3605,

Fast Tract Mediation — A Process for Prompt

Resolution of Tax Issues.

If any issues remain unresolved, or if you decide not

to use the Fast Track Mediation process, you still have

the right to use the normal appeal process.

Appeal Process

If you disagree with the decision of an IRS employee

at any time during the collection process, you can ask

that employee’s manager to review your case.

When you ask for a review, the employee will refer

you to a manager. The manager will either speak with

you then or will return your call by the next work day.

If you disagree with the manager’s decision, you have

the right to file an appeal under the Collection Appeals

Program. This program enables you to appeal most

collection actions we may take, including filing a lien,

placing a levy on your wages or bank account, or seizing

your property. You also will have an opportunity to

request a Collection Due Process (CDP) hearing with

the Office of Appeals after the initial filing of a Notice

of Federal Tax Lien. This opportunity takes place prior

to the initial levy action, unless collection of the tax is in

jeopardy or the levy is on your state tax refund. In these

two cases, you can ask for a CDP hearing after the levy.

See Publication 1660, Collection Appeal Rights for

more information.

If you want someone to represent you. . .

When dealing with the IRS, you may choose to

represent yourself, or you may have an attorney, a

certified public accountant, an enrolled agent, or any

person enrolled to practice before the IRS represent

you. For example, you may want your tax preparer to

respond to a tax bill that you believe is incorrect.

What if you believe your bill is wrong?

If you believe your bill is wrong, let us know

as soon as possible. Call the number on your

bill, write to the IRS office that sent you the

bill, call 1–800–829–1040, or visit your local

IRS office, if you prefer.

To help us correct the problem, gather a copy

of the bill along with copies of any records, tax

returns, and canceled checks, etc., that will help

us understand why you believe your bill is wrong.

If you write to us, tell us why you believe

your bill is wrong. With your letter, include

copies of all the documents you gathered

to explain your case. Please do not send

original documents. If we find you are correct,

we will adjust your account and, if necessary,

send you a corrected bill.

If your representative appears without you, he or

she must file a Form 2848, Power of Attorney and

Declaration of Representative, or Form 8821, Tax

Information Authorization, before being allowed to

receive or inspect confidential material.

Other items to note. . .

➧ The IRS can share your tax information —

By law, the IRS can share your tax information

with city and state tax agencies and, in some

cases, with the Department of Justice, other

federal agencies, and people you authorize.

We can also share it with certain foreign

governments under tax treaty provisions.

➧ We may contact a third party — The law

allows us to contact someone else, such as

neighbors, banks, employers, or employees,

to investigate your case.

➧ If you are involved in bankruptcy

proceedings — Contact your local IRS office.

While the proceeding may not eliminate your tax

debt, it may temporarily stop IRS enforcement

action from collecting a debt related to the

bankruptcy.

➧ Help for an innocent spouse — In some

cases, you may not be responsible for taxes,

interest, and penalties on a joint income tax return.

Contact your local IRS office for more information.

For information about your rights as an innocent

spouse, see Publication 971, Innocent Spouse

Relief. For information on three ways to get

help with the amount you owe, see Form 8857,

Request for Innocent Spouse Relief (And

Separation of Liability and Equitable Relief).
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What to Do When You Owe Taxes

Pay Your Taxes —

or Tell Us Why You Can’t

When you file your tax return, we check to see if the

math is accurate and if you have paid the correct amount.

If you have not paid all you owe, we send a bill called a

Notice of Tax Due and Demand for Payment. (You may

have already received it if you did not pay your taxes or

if your payment was incorrect.) The bill includes the

taxes, plus penalties and interest. We encourage you to pay

your bill by check or money order as quickly as possible.

If you have received a bill for unpaid taxes, you

should pay the entire amount — or tell us right away

why you cannot. Call the office that sent you the bill.

There are several different ways that you can pay.

If you do not pay the taxes you owe and if you make no

effort to pay them, we can ask you to take action to pay your

taxes, such as selling or mortgaging any assets you have or

getting a loan. If you still make no effort to pay your bill or

to work out a payment plan, we may also take more serious

action, such as seizing your bank account, levying your

wages, or taking your other income or assets. (See pages

7–10 for more information about liens and levies.)

If you cannot pay all that you owe now,

there’s still something you can do. . .

If you cannot pay all your taxes now, pay as much as you

can. By paying now, you reduce the amount of interest

and penalty you will owe. Then, immediately call, write,

or visit the nearest IRS office to explain your situation.

After you explain your problem, we may ask you to

fill out a Collection Information Statement to help us

compare your monthly income with your expenses and

to figure out the amount you can pay. We can then help

you work out a payment plan that fits your problem.

Based on your situation, we will work with you to

consider several different ways to pay what you owe:

➧ You may be able to make monthly payments

through an installment agreement,

➧ You may be able to apply for an Offer in

Compromise, or

➧ You may qualify for a temporary delay or your

case may be considered a significant hardship.

By law, the IRS has the authority to collect outstanding

federal taxes for ten years from the date of assessment.

If you enter into an installment agreement, the IRS may

request you to sign a waiver to extend the collection

period. The ten year period is automatically extended

for bankruptcy.

There is a special program to help you

with tax problems that cannot be resolved

through normal IRS channels. . .

The Taxpayer Advocate Function is an IRS

program that provides an independent system to

assure that tax problems, which have not been

resolved through normal channels, are promptly

and fairly handled. Each state and service center

 has at least one local Taxpayer Advocate, who is

independent of the local IRS office and reports

directly to the National Taxpayer Advocate.

The Taxpayer Advocate can help if:

➧ You are suffering, or are about to suffer,

a significant hardship

➧ You are facing an immediate threat of

adverse action

➧ You will incur significant cost (including

fees for professional representation)

➧ You will suffer irreparable injury or

long-term adverse impact

➧ You have experienced a delay of more

than 30 days to resolve the issue

➧ You have not received a response or

resolution by the date promised; or

➧ All established systems or procedures have

failed to operate as intended to resolve the

problem or dispute.

You may apply for Taxpayer Advocate

Function assistance by:

➧ Completing Form 911, Application For

Taxpayer Assistance Order (ATAO)

➧ Completing a written request for assistance

(if Form 911 is not available), or

➧ Requesting an IRS employee complete a

Form 911 on your behalf (in person or over

the phone).

➧ Sending (or FAX) Form 911 to your local

Taxpayer Advocate. Refer to Publication

1546, The Taxpayer Advocate Service of the

IRS, for your local Taxpayer Advocate

address, phone and FAX number. Call the

Taxpayer Advocate Service toll-free number

on 1–877–777– 4778. TDD 800– 829– 4059.
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or certified funds; payroll deductions that your employer

takes from your salary and regularly sends to the IRS;

or electronic transfers from your bank account or other

similar means.

Your agreement is based on your financial situation.

If a change in your financial situation makes it necessary

to change your agreement, contact us. If you have an

installment agreement, you must pay on time.

If you cannot, tell us immediately. Failure to

make timely payments under an installment agreement

could terminate the agreement.

Apply for an

Offer in Compromise

The Internal Revenue Service (IRS) may accept an Offer

in Compromise to settle unpaid tax accounts for less

than the full amount of the balance due. This applies to

all taxes, including any interest, penalties, or additional

amounts arising under the internal revenue laws.

The IRS may legally compromise a tax liability for

one of the following reasons:

➧ Doubt as to liability — there is doubt as to

whether or not the assessed tax is correct.

➧ Doubt as to collectibility — there is doubt

that you could ever pay the full amount of the tax

owed. In these cases, the total amount you owe

must be greater than the sum of your assets and

future income.

➧ Promote effective tax administration —

there is no doubt that the assessed tax is correct

and no doubt that the amount owed could be

collected, but you have an economic hardship or

other special circumstances which may allow the

IRS to accept less than the total balance due.

You may submit an Offer in Compromise by completing

Form 656, Offer in Compromise. If you are basing your

offer on doubt as to collectibility or promotion of effective

tax administration, you must also submit Form 433-A,

Collection Information Statement for Individuals.

Temporarily Delay

the Collection Process

If we determine that you cannot pay any of your tax

debt, we may temporarily delay collection until your

financial condition improves. You should know that if

we do delay collecting from you, your debt will increase

because penalties and interest are charged until you pay

the full amount. During a temporary delay, we will

again review your ability to pay. We may also file a

Notice of Federal Tax Lien (see page 7) to protect the

government’s interest in your assets.

Set Up an

Installment Agreement

Installment agreements allow the full payment of your

debt in smaller, more manageable amounts. Installment

agreements generally require equal monthly payments.

The amount of your installment payment will be based

on the amount you owe and your ability to pay that

amount within the time available to the IRS to collect

the tax debt from you. An installment agreement is a

reasonable payment option for some taxpayers. To be

eligible for an installment agreement, you must file all

of your returns that are due.

If you already have an installment agreement from a

previous amount you owed, we may still be able to help

you. We may be able to include all of the amounts you

owe into one installment agreement. However, you may

have to complete a Collection Information Statement

explaining your financial situation.

You should be aware, however, that an installment

agreement is more costly to you than paying all the taxes

you owe now and may be more costly than borrowing

funds to pay the amount you owe. Why? Because the

IRS charges interest and penalties on the tax you owe,

and charges interest on the unpaid penalties and interest

that have been charged to your tax account. So, while

you are making payments on your tax debt through an

installment agreement, IRS continues to charge interest

and penalties on the unpaid portion of that debt. The

interest rate on a bank loan or cash advance on your

credit card may be lower than the combination of

penalties and interest that IRS charges.

You should know about another cost associated with

an installment agreement: To set up your installment

agreement, we will charge you a $43 user fee.

If you would like to pay off your tax debt through

an installment agreement and. . .

➧ You owe $25,000 or less in tax, just call

the number on your bill to set up your plan now.

We’ll tell you what you have to do to begin today.

➧ You owe more than $25,000 in tax, we may

still be able to set up an installment agreement

for you, but you may have to fill out a Collection

Information Statement.

Even though you agree to an installment agreement,

we may still file a Notice of Federal Tax Lien to secure

the government’s interest until you make a final payment.

(See Liens on page 7.) However, we cannot levy against

your property while your request for an installment

agreement is being considered, while your agreement is

in effect, for 30 days after your request for an agreement

has been rejected, or for any period while an appeal of

the rejection is being evaluated by the IRS.

If you do arrange for an installment agreement, you

can pay with personal or business checks, money orders,
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About IRS Collection Actions

Before we take any action explained in this section, we will contact you to give you a chance to voluntarily pay what

you owe. But if you do not pay your taxes in full and do not contact us to let us know why you cannot pay or why

you disagree with our decision to take enforcement action, the law requires us to take action. We may:

➧ File a lien against your property (Make a legal claim to your property as security or payment for your tax

debt) (See the information below).

➧ Serve a levy on your property or salary (Legally seize your property to satisfy a tax debt) (See page 8).

➧ Assess a trust fund recovery penalty for employment taxes (See page 11).

These enforced collection actions are the means by which we can enforce the Notice and Demand for Tax Payment.

On the following pages, we explain these collection actions and the rules that govern them.

Liens

Liens give us a legal claim to your property as security or

payment for your tax debt. A Notice of Federal Tax

Lien may be filed only after:

➧ We assess the liability;

➧ We send you a Notice and Demand for Payment

— a bill that tells you how much you owe in taxes;

and

➧ You neglect or refuse to fully pay the debt within

10 days after we notify you about it.

Once these requirements are met, a lien is created

for the amount of your tax debt. By filing this notice,

your creditors are publicly notified that we have a claim

against all your property, including property you acquire

after the lien was filed.

The lien attaches to all your property (such as your

house or car) and to all your rights to property (such

as your accounts receivable, if you are an employer).

Once a lien is filed, your credit rating may be

harmed. You may not be able to get a loan to

buy a house or a car, get a new credit card, or

sign a lease.

Releasing a lien

We will issue a Release of the Notice of Federal Tax

Lien:

➧ Within 30 days after you satisfy the tax due

(including interest and other additions) by

paying the debt or by having it adjusted, or

➧ Within 30 days after we accept a bond that you

submit, guaranteeing payment of the debt.

In addition, you must pay all fees that a state or other

jurisdiction charges you to file and release the lien. These

fees will be added to the amount you owe. See Publication

1450, Request for Release of Federal Tax Lien.

Usually 10 years after a tax is assessed, a lien releases

automatically if we have not filed it again. If we knowingly

or negligently do not release a Notice of Federal Tax Lien

when it should be released, you may sue the federal

government, but not IRS employees, for damages.

Payoff amount

The full amount of your lien will remain a matter

of public record until it is paid in full. However, at any

time you may request an updated lien payoff amount to

show the remaining balance due. An IRS employee

(either over the toll-free customer service telephone line,

or at a walk-in counter service site, or your local IRS

lien desk) can issue you a letter with the current amount

due in order to release a lien.

Caution
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Applying for a discharge of a federal tax lien

If you are giving up ownership of property, such as when

you sell your home, you may apply for a Certificate of

Discharge. Each application for a discharge of a tax lien

releases the effects of the lien against one piece of property.

Note that when certain conditions exist, a third party may

also request a Certificate of Discharge. If you’re selling

your primary residence, you may apply for a taxpayer

relocation expense allowance. Certain conditions and

limitations apply. See Publication 783, Instructions on

How to Apply for a Certificate of Discharge of Property

from the Federal Tax Lien.

Making the IRS lien secondary to another lien

In some cases, a federal tax lien can be made secondary

to another lien. That process is called subordination.

See Publication 784, How to Prepare Application for

Certificate of Subordination of Federal Tax Lien.

Withdrawing liens

By law, a filed notice of tax lien can be withdrawn if:

➧ the notice was filed too soon or not according to

IRS procedures,

➧ you entered into an installment agreement to pay

the debt on the notice of lien (unless the

agreement provides otherwise),

➧ withdrawal will speed collecting the tax, or

➧ withdrawal would be in your best interest

(as determined by the Taxpayer Advocate)

and the best interest of the government.

We will give you a copy of the withdrawal and, if

you write to us, we will send a copy to other institutions

you name.

Appealing the filing of a lien

The law requires us to notify you in writing not more

than 5 business days after the filing of a lien. We may

give you this notice in person, leave it at your home or

your usual place of business, or send it by certified or

registered mail to your last known address. You may

ask an IRS manager to review your case or you may

request a Collection Due Process hearing with the Office

of Appeals by filing a request for a hearing with the

office listed on your notice. You must file your request

by the date shown on your notice. Some of the issues

you may discuss include:

➧ You paid all you owed before we filed the lien,

➧ We assessed the tax and filed the lien when you

were in bankruptcy and subject to the automatic

stay during bankruptcy,

➧ We made a procedural error in an assessment,

➧ The time to collect the tax (called the statute of

limitations) expired before we filed the lien,

➧ You did not have an opportunity to dispute the

assessed liability,

➧ You wish to discuss the collection options, or

➧ You wish help, as an innocent spouse.

At the conclusion of your Collection Due Process

hearing, the IRS Office of Appeals will issue a

determination. That determination may support the

continued existence of the filed federal tax lien or it may

determine that the lien should be released or withdrawn.

You will have a 30-day period, starting with the date

of the determination, to bring a suit to contest the

determination. See Publication 1660, Collection Appeal

Rights, for more information.

Levies

A levy is a legal seizure of your property to satisfy a tax

debt. Levies are different from liens. A lien is a claim

used as security for the tax debt, while a levy actually

takes the property to satisfy the tax debt.

If you do not pay your taxes (or make arrangements to

settle your debt), the IRS may seize and sell any type of

real or personal property that you own or have an interest

in. For instance,

➧ We could seize and sell property that you hold

(such as your car, boat, or house), or

➧ We could levy property that is yours but is held

by someone else (such as your wages, retirement

accounts, dividends, bank accounts, licenses,

rental income, accounts receivables, the cash

value of your life insurance, or commissions).

We usually levy only after these three requirements

are met:

➧ We assessed the tax and sent you a Notice and

Demand for Payment,

➧ You neglected or refused to pay the tax, and
– 9 –

➧ We sent you a joint Final Notice of Intent to

Levy and Notice of Your Right to A Hearing

(levy notice) at least 30 days before the levy.

We may give you this joint notice in person, leave

it at your home or your usual place of business,

or send it to your last known address by certified

mail, return receipt requested. Please note: if

we levy your state tax refund, you may receive a

Notice of Levy on Your State Tax Refund, Notice

of Your Right to Hearing after the levy.

You may ask an IRS manager to review your case, or

you may request a Collection Due Process hearing with

the Office of Appeals by filing a request for a Collection

Due Process hearing with the IRS office listed on your

notice. You must file your request within 30 days of

the date on your notice. Some of the issues you may

discuss include:

➧ You paid all you owed before we sent the

levy notice,

➧ We assessed the tax and sent the levy notice

when you were in bankruptcy and subject to

the automatic stay during bankruptcy,

➧ We made a procedural error in an assessment,

➧ The time to collect the tax (called the statute

of limitations) expired before we sent the

levy notice,

➧ You did not have an opportunity to dispute

the assessed liability,

➧ You wish to discuss the collection options, or

➧ You wish to make a spousal defense.

At the conclusion of your hearing, the Office of

Appeals will issue a determination. You will have

30-days after the determination date to bring a suit

to contest the determination. See Publication 1660,

Collection Appeal Rights, for more information.

If your property is levied or seized, contact the

employee who took the action. You also may ask

the manager to review your case. If the matter is still

unresolved, the manager can explain your rights to

appeal to the Office of Appeals.

Levying your wages, federal payments,

such as federal retirement or federal

vendor payments, or your bank account

If we levy your wages or federal payments, the levy will

end when:

➧ The levy is released,

➧ You pay your tax debt, or

➧ The time expires for legally collecting the tax.

If we levy your bank account, for 21 days your bank

must hold funds you have on deposit — up to the

amount you owe. This period allows you time to solve

any problems from the levy or to make other arrangements

to pay. After 21 days, the bank must send the money, plus

interest if it applies, to the IRS.

To discuss your case, call the IRS employee whose

name is shown on the Notice of Levy.

Filing a claim for reimbursement when we

made a mistake in levying your account

If you paid bank charges because of a mistake we made

when we levied your account, you may be entitled to a

reimbursement. To be reimbursed, you must file a claim

with us within 1 year after your bank charged you the

fee. Use Form 8546, Claim for Reimbursement of Bank

Charges Incurred Due to Erroneous Service Levy or

Misplaced Payment Check.

Levying your federal payments through

the Federal Payment Levy Program

Under the Federal Payment Levy Program, if you owe

the IRS, in order to pay that debt, we may levy (take)

monies from the following federal payments that you

may receive: retirement from the Office of Personnel

Management, social security benefits, federal vendor

payments, federal employee salaries, or federal employee

travel advances and reimbursements. This program

electronically levies your federal payments paid through

the Department of Treasury, Financial Management

Service (FMS). If we electronically levy your federal

payments, the levy will take 15% from each of the

payments until the account is resolved. If you already

are working with an IRS employee, call that employee

for assistance. If you are not working with an employee,

call 1–800–829–7650 for assistance.

Releasing a levy

We must release your levy if any of the following occur:

➧ You pay the tax, penalty, and interest you owe.

➧ We discover that the time for collection

(the statute of limitations) ended before the

levy was served.

➧ You provide documentation proving that

releasing the levy will help us collect the tax.

➧ You have an installment agreement, or enter into

one, unless the agreement says the levy does not

have to be released.

➧ We determine that the levy is creating a

significant economic hardship for you.

➧ The expense of selling the property would be

greater than the fair market value of the property.

Releasing your property

Before the sale date, we may release the property if:

➧ You pay the amount of the government’s interest

in the property,
– 10 –

Some property cannot be levied or seized

By law, some property cannot be levied or seized.

We may not seize any of your property when the

expense of selling the property would be more

than the tax debt. In addition, we may not seize

or levy your property on the day you attend a

collection interview because of a summons.

Other items we may not levy or seize include:

➧ School books and certain clothing;

➧ Fuel, provisions, furniture, and personal

effects for a household, totaling $6,780;*

➧ Books and tools you use in your trade,

business, or profession, totaling $3,390;*

➧ Unemployment benefits;

➧ Undelivered mail;

➧ Certain annuity and pension benefits;

➧ Certain service-connected disability

payments;

➧ Workmen's compensation;

➧ Salary, wages, or income included in a

judgment for court-ordered child support

payments;

➧ Certain public assistance payments;

➧ A minimum weekly exemption for wages,

salary, and other income.

Use Publication 1494, Table of Figuring

Amount Exempt from Levy on Wages, Salary

and Other Income (Forms 668-W(c)(DO) and

668-W(c)), to determine the amount of earned

income exempt from levy.

*These amounts will be indexed annually for inflation.

➧ You enter into an escrow arrangement,

➧ You furnish an acceptable bond,

➧ You make an acceptable agreement for paying

the tax, or

➧ The expense of selling your property would be

greater than the fair market value of the property.

Returning levied property

If you request the return of levied property within

nine months from the date of the levy, we can consider

returning the property if:

➧ We levy before we send you the two required

notices or before your time for responding to

them has passed (ten days for the Notice and

Demand; 30 days for the Notice of Intent to

Levy and the Notice of Right to Hearing).

➧ We did not follow our own procedures.

➧ We agree to let you pay in installments, but we

still levy, and the agreement does not say that

we can do so.

➧ Returning the property will help you pay your taxes.

➧ Returning the property is in your and the

government’s best interest.

Selling your property

We will post a public notice of a pending sale, usually

in local newspapers or flyers. We will deliver the

original notice of sale to you or send it to you by

certified mail.

After placing the notice, we must wait at least ten

days before conducting the sale, unless the property is

perishable and must be sold immediately.

Before the sale, we will compute a minimum bid

price. This bid is usually 80% or more of the forced

sale value of the property, after subtracting any liens.

If you disagree with this price, you can appeal it.

Ask that the price be computed again by either an IRS

or private appraiser.

You may also ask that we sell the seized property

within 60 days. For information about how to do so,

call the IRS employee who made the seizure. We will

grant your request, unless it is in the government’s best

interest to keep the property. We will send you a letter

telling you of our decision about your request. After the

sale, we first use the proceeds to pay the expenses of the

levy and sale. Then we use any remaining amount to

pay the tax bill.

➧ If the proceeds of the sale are less than

the total of the tax bill and the expenses

of levy and sale, you will still have to pay the

unpaid tax.

➧ If the proceeds of the sale are more than

the total of the tax bill and the expenses of

the levy and sale, we will notify you about the

surplus money and will tell you how to ask for a

refund. However, if someone, such as a mortgagee

or other lienholder, makes a claim that is superior

to yours, we will pay that claim before we refund

any money to you.

Redeeming your real estate

You (or anyone with an interest in the property) may

redeem your real estate within 180 days after the sale.

You must pay the purchaser the amount paid for the

property, plus interest at 20% annually.
– 11 –

Employment Taxes

for Employers

To encourage prompt payment of withheld income

and employment taxes, including social security taxes,

railroad retirement taxes, or collected excise taxes,

Congress passed a law that provides for the trust fund

recovery penalty. (These taxes are called trust fund taxes

because you actually hold the employee’s money in trust

until you make a federal tax deposit in that amount.)

If we plan to assess you for the trust fund recovery

penalty, we will send you a letter stating that you are the

responsible person. You have 60 days after you receive

our letter to appeal our proposal. If you do not respond to

our letter, we will assess the penalty against you and send

you a Notice and Demand for Payment. Also, we can

apply this penalty whether or not you are out of business.

A responsible person is a person or group of people

who has the duty to perform and the power to direct the

collecting, accounting, and paying of trust fund taxes.

This person may be:

➧ an officer or an employee of a corporation,

➧ a member or employee of a partnership,

➧ a corporate director or shareholder,

➧ a member of a board of trustees of a nonprofit

organization, or

➧ another person with authority and control over

funds to direct their disbursement.

Assessing the trust fund recovery penalty

We may assess the penalty against anyone:

➧ who is responsible for collecting or paying

withheld income and employment taxes, or

for paying collected excise taxes, and

➧ who willfully fails to collect or pay them.

For willfulness to exist, the responsible person

must:

➧ Have known about the unpaid taxes, and

➧ Have used the funds to keep the business going

or allowed available funds to be paid to other

creditors.

Especially for employers. . .

Employment taxes are:

➧ The amount you should withhold from

your employees for both income and

social security tax, plus

➧ The amount of social security tax you

pay on behalf of each employee.

If you ignore the federal tax

deposit and filing requirements,

the amount you owe can increase

dramatically.

If you do not pay your employment taxes

on time, or if you were required to and did

not include your payment with your return,

we will charge you interest and penalties on

any unpaid balance. We may charge you

penalties of up to 15% of the amount not

deposited, depending on how many days late

you are.

If you do not pay withheld trust fund taxes,

we may take additional collection action.

We may require you to:

➧ File and pay your taxes monthly rather

than quarterly, or

➧ Open a special bank account for the

withheld amounts, under penalty of

prosecution. See Form 8109, Federal

Tax Deposit Coupon and Circular E,

Employer’s Tax Guide.

See publication 535, Business Expenses, for

information on how to deduct interest paid as a

business deduction.

Caution
– 12 –

Figuring the penalty amount

The amount of the penalty is equal to the unpaid balance

of the trust fund tax. The penalty is computed based on:

➧ The unpaid income taxes withheld, plus

➧ The employee’s portion of the withheld FICA

taxes.

For collected taxes, the penalty is based on the unpaid

amount of collected excise taxes.

We offer you a number of free publications and forms. . .

These IRS forms and publications mentioned in this document give you more information about the various

situations discussed. For copies of these documents, call us, write to us, visit your local library or IRS office, or

contact us at our website at www.irs.gov.

➧ Publication 5, Your Appeal Rights and

How to Prepare a Protest if You Don’t Agree

➧ Publication 783, Instructions on How to Apply

for a Certificate of Discharge of Property

from the Federal Tax Lien

➧ Publication 784, How to Prepare Application

for Certificate of Subordination of Federal

Tax Lien

➧ Publication 908, Bankruptcy Tax Guide

➧ Publication 919, Is My Withholding Correct?

➧ Publication 1450, Request for Release of

Federal Tax Lien

➧ Publication 1494, Table of Figuring Amount

Exempt from Levy on Wages, Salary and

Other Income

➧ Publication 1546, The Taxpayer Advocate

Service of the IRS

➧ Publication 1660, Collection Appeal Rights

➧ Circular E, Employer’s Tax Guide

Once we assert the penalty, we can take

collection action against your personal assets.

For instance, we can file a federal tax lien

against you, if you are a responsible person.

Appealing the decision

You have the right to appeal our decision to recommend

that you pay the trust fund recovery penalty amount.

See Publication 5, Your Appeal Rights and How to

Prepare a Protest if You Don’t Agree, for a clear outline

of the appeals process.

Caution

Forms

➧ Form 433-F, Collection Information Statement

➧ Form 911, Application for Taxpayer

Assistance Order

➧ Form 656, Offer in Compromise

➧ Form 2848, Power of Attorney and

Declaration of Representative

➧ Form 8109, Federal Tax Deposit Coupon

➧ Form 8821, Tax Information Authorization

➧ Form 8546, Claim for Reimbursement of Bank

Charges Incurred Due to Erroneous Service

Levy or Misplaced Payment Check

➧ Form 9465, Installment Agreement Request

Publications

➧ Publication 1, Your Rights as a Taxpayer