The IRS wants its due

Under an Internal Revenue Service collection program that got under way

last month, certain individuals and businesses with unpaid tax bills may

be subject to a continual 15 percent levy on money due them from the federal


The new effort, the Federal Payment Levy Program (FPLP), is the result

of a provision of the Taxpayer Relief Act of 1997. And federal employees

will have the dubious distinction of being one of the initial targets of

the new IRS collection program.

Through the FPLP, the IRS can collect overdue taxes through a continual

levy on certain federal payments, including federal employee pay. This program

will be used in conjunction with an already existing levy program.

In its initial phase, the FPLP will reduce federal retirement benefits

paid to individuals through the Office of Personnel Management and federal

payments to vendors doing business with the government.

Later, the FPLP will expand to include federal employee salaries, some Social

Security benefits and other federal payments.

Under prior law, the IRS could levy Social Security payments. But other

types of federal payments either couldn't be levied at all or the levies

were limited to amounts that exceeded a certain exemption level.

Federal payments to a delinquent taxpayer will not be affected in certain

circumstances, including when the taxpayer is in bankruptcy, is in a hardship

situation or has applied for relief as an innocent or injured spouse.

The levy program will not apply to all federal insurance payments: Black

lung benefits and Supplemental Security Income payments won't be touched.

A taxpayer whose federal payments are subject to levy under this program

can contact the IRS to resolve the issue, either by paying the tax bill,

entering into an installment agreement or proposing a compromise.

Determining whether to impose a levy under the FPLP will be done on

a case-by-case basis. A file of delinquent taxpayer accounts will be transmitted

to the Treas-ury Department's Financial Management Service (FMS) to be

matched against pending federal payments. When a match is found, the IRS

will send the taxpayer a final notice of levy with an explanation of appeal


If the taxpayer doesn't respond, the IRS will lower the boom and transmit

the levy electronically to the FMS. From that point on, the FMS will reduce

any federal payments subject to the levy by 15 percent.

When fully implemented, the FPLP is projected to generate $478 million

in revenues annually.

I'm only surprised that the IRS didn't do this sooner. Why should someone

who owes taxes continue to receive federal payments? It doesn't make sense,

and this program is long overdue.

—Zall is a retired federal employee who since 1987 has written the Bureaucratus

column for Federal Computer Week. He can be reached at [email protected]


"Comment: Tax smart or tax trap?" [, Aug. 28, 2000]

"Discipline problems" [Federal Computer Week, Aug. 21, 2000]

"Comment: Avoid these life insurance mistakes" [, Aug. 18, 2000]

BY Milt Zall
August 28, 2000

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