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Employer Compliance with IRS Levies

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What Is a Notice of Levy?

A notice of levy is a notice that the IRS sends to a person who has outstanding tax debt. The notice allows the IRS to legally seize the person’s property in order to satisfy the debt. The IRS may also:

  • Garnish the person’s wages
  • Seize money in a bank account
  • Seize and sell real property and/or personal property such as vehicles

The notice is sometimes called a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” These documents must be responded to immediately in order to avoid further penalties.

What Is Required of an Employer Who Receives a Notice of Levy?

In some cases, an employer may receive a notice of levy from the IRS against one of its employees, vendors, or even a third party. In such cases, the employer is required to turn over whatever property that the IRS requests from it that it is currently holding onto. Besides actual physical property, this property can also include:

  • Some of the employee’s salary or wages
  • Other types of compensation, such as income derived from bonuses or a pension

The IRS typically seizes these wages and financial amounts before they are paid or rendered to the employee. The employer has a duty to transfer these properties or amounts to the IRS, or it may face penalties.

What Are the Penalties for an Employer’s Non-Compliance?

An employer that fails to comply with an IRS levy notice directed towards one of its workers can become liable for the tax debt. The employer may also incur liability for any penalties on the debt, including interest. In some cases, the IRS may also impose a penalty for up to 50% of the tax debt that is owed by the employee. These penalties can have drastic effects on the employer’s own business tax issues. Thus, it is extremely important that an employer complies with any levy notices that it receives from the IRS.

Should I Hire a Lawyer for Help with an IRS Levy?

Employers should be prepared to handle an IRS levy that is directed towards one of their employees. This type of situation can be complex, as it involves complying with all of the rules and regulations for an order from a federal agency. You may wish to hire a tax attorney in your area if you need any guidance regarding IRS tax levies. Your attorney can provide you with legal advice and representation regarding such matters. Also, if you need to file a legal action or if you need to appear in court, your lawyer can instruct you on how to proceed with those issues as well.

Photo of page author Jose Rivera

, LegalMatch Legal Writer

Last Modified: 01-04-2016 01:01 PM PST

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