Federal Tax Levy

State Income Tax Levy Program (SITLP)

Under the State Income Tax Levy Program, the IRS may levy (take) your state tax refund. Currently, this only applies to individual state tax refunds, but may include business state tax refunds in the future. SITLP matches federal tax delinquent accounts against a database of state tax refunds for states participating in SITLP. If your state tax refund is levied, the state will issue a notice advising you of the levy. The IRS will also issue a notice, after the levy, offering you the opportunity to appeal the levy. The IRS notice will NOT be issued if you previously received a notice of an intent to levy that advised you of your right to a hearing.

Federal Payment Levy Program (FDLP)

The IRS began the Federal Payment Levy Program in July 2000 to collect overdue taxes through a continuous levy on certain federal payments disbursed by the Financial Management Service (FMS). The documentation states that in the future, the program will expand to include additional federal employee salaries and other types of federal payments. Below is a list of the current salaries and payments subjected to the program.

  • Federal employee retirement annuities
  • Federal payments made to you as a contractor/vendor doing business with the government (including Defense contracts)
  • Federal employee travel advances or reimbursements
  • Certain Social Security benefits paid to you
  • Some federal salaries
  • Medicare provider and supplier payments
  • Railroad Retirement Board benefits paid to you

FMS may reduce any federal payments subject to the levy by 15 percent, or the exact amount of tax owed if it is less than 15 percent of the payment. Some contract/vendor payments, however, will be reduced by 100 percent, or the exact amount of tax owed. The levy is continuous until your overdue taxes are paid in full, or other arrangements are made to satisfy the debt. Each time your federal payment is levied, FMS will send you a letter of explanation, including information on which federal payment was levied.

Federal payments to a delinquent taxpayer will not be included in the program in certain circumstances. These circumstances include, when you are in bankruptcy, have applied for relief as an innocent or injured spouse, made alternative arrangements to pay, or the IRS has determined you are in a hardship situation.

Contact us immediately if you have received an Intent to Levy notice from the IRS so we can discuss your situation and options.

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