Did you wake up this morning and realize your Social Security deposit looks lower than usual? Did you do contract work for the government and didn’t get paid? If so, you may be the victim of the Federal Payment Levy Program.
If you receive any type of income from the federal government and you owe money to the IRS, there is a strong possibility that you are going to be dealing with the Federal Payment Levy Program (FPLP). This enforced collection action was enacted in 2000 as a means for the IRS to seize money that is due to individuals and businesses if they owe taxes. This money can come from a number of sources including, Medicare provider payments, federal salaries, Social Security benefits, military retirement payments, and federal payments to contractors. Once the levies are issued, they are continuous and will not stop until either a) the past-due debt is paid in full, or b) the levy is released directly through the Treasury Department’s Bureau of the Fiscal Service (BFS) and the IRS. It is a steep, uphill battle once an FPLP levy has been issued so it is very important to understand your rights and the best ways to prevent this action from being taken on your account.
- Pay attention to the notices you are receiving. It may be difficult to open those all too familiar envelopes the IRS sends you so regularly, but the information they contain could keep you protected. If you recently accrued the tax balance, your first notices will be reminders that you owe a balance and that payment should be made soon. It is at this point that you should contact the IRS and make arrangements to pay the debt through an installment agreement or submit current financial information to prove hardship.
Your next notices aren’t so kind; however, they provide you with appeal rights that can keep you protected. Look out for Final Notices such as a CP 90 or CP 297. These give you 30 days to either negotiate a resolution of the debt or file for a hearing which could buy you as much as 2-4 months of additional protection from the FPLP.
- Stay compliant with all tax obligations. File your current tax returns on time and don’t incur a new balance. It is very difficult to be successful with negotiating with the federal government if you are not doing what you are supposed to be doing. If pyramiding of tax balances is an ongoing issue, look at cost-cutting measures. If you are a business, try to reduce your overhead by cutting payroll, reducing utility usage, or increasing advertising to drive in more business. If you are an individual, look at sending less money to your credit card companies and more to the Internal Revenue Service. Whatever can be done to gain compliance could save you from the headache of dealing with an FPLP levy.
- Even if you are working with a collection agent at the IRS, you are not guaranteed protection from the FPLP. If you have gained compliance and you submitted a proposal to the Revenue Officer, verify a hold of all other forms of collection action was put into place. The agent may not issue levies through their office, but the Federal Payment Levy Program is completely separate from their collection system. They will have to work with their Group Manager to ensure there is a freeze on the FPLP as they work on your account.
- If you are in bankruptcy, your federal payments cannot be levied through the FPLP. Once this has been discharged though, you will be placed in active collections again and you will be subject to levy action. If this is the case, be mindful with your compliance and work on getting into a resolution with IRS.
The FPLP can take up to 100% of federal payments owed to you or your business. If this occurs, it could crumble what you have worked so hard to build. This best way to deal with the FPLP is to avoid the FPLP. If you are currently going through this type of levy process, or if you are concerned with the possibility of this levy action, it is best for you to contact a tax professional.
Call Timberline Tax Group at 844-345-3250 for a free consultation.