Collecting The Levy
Below is a MRR and PLR article in category Finance -> subcategory Other.
Collecting The Levy
Overview:
The Financial Management Service (FMS), part of the Department of the Treasury, offers centralized debt collection for federal agencies. Recently, FMS has implemented two federal debt collection programs mandated by Congress. One targets delinquent non-tax debts by offsetting federal payments, while the other focuses on collecting delinquent tax debts from individuals receiving federal payments.
Key Legislation:
The Taxpayer Relief Act of 1997 empowers the IRS to recover overdue tax debts from recipients of federal payments. This allows for a levy of up to 15% of each payment until the debt is settled.
Process:
Before any action, the IRS sends a certified notice to each taxpayer with the following details:
- The tax bill
- Intent to levy
- Rights to appeal
- An IRS contact number for assistance
If taxpayers arrange repayment within 30 days of receiving the notice, the levy can be avoided. Social Security beneficiaries receive a second notice providing an option to make payment arrangements and avoid the levy.
When repayments commence, FMS will notify debtors about reduced payments and coordinate with the IRS regarding past debt issues. Taxpayers can also reach out to the IRS at any time to settle or release the levy.
FMS and the Treasury Offset Program:
FMS manages federal tax debts through the Treasury Offset Program (TOP), which also handles non-tax debts. The TOP database contains information on delinquent debts submitted by federal agencies. The IRS provides FMS with electronic files of tax debt details, which are integrated into the TOP database.
FMS then cross-references federal payment data with the TOP database to identify debtors, especially those receiving Social Security benefits. The IRS issues a levy notice to FMS, which reduces matched payments by 15% until the debt is cleared, other arrangements are made, or the statutory period expires.
Recent Developments:
In February 2002, FMS began adjusting IRS garnishments for Social Security recipients with outstanding federal tax debts. The garnished amounts are sent to the IRS, while the remaining balance is paid to the taxpayer.
By utilizing these streamlined procedures, the FMS efficiently aids in recovering delinquent debts, ensuring compliance and support for federal fiscal responsibilities.
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