IRS Issues Guidance on Calculating Amounts Exempt From Levy

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By Christine Pulfrey

The Internal Revenue Service issued guidance May 7 on how to determine the wage and salary amounts that are exempt from levy, following changes that were made to the calculations under the recent tax code overhaul.

Notice 1439, “Figuring the Amount Exempt from Levy on Wages, Salary, and Other Income, Forms 668-W, 668-W(ACS) and 668-W(ICS),” said that its instructions replace those contained in the three versions of levy Form 668-W.

Among the changes in Notice 1439, the tables no longer base exempt amounts on number of dependents. Rather, the exempt amounts are based on the number of exemptions. The notice also helps employers in calculating the exemption amount, detailing three steps that cover the taxpayer’s wages, salary and income; age; and the amount that needs to be paid to cover the support of children. The notice also includes an example of a statement for dependents and filing status.

The IRS revised Publication 1494, Tables for Figuring Amount Exempt From Levy on Wages, Salary, and Other Income (Forms 668-W(ACS), 668-W(c)(DO) and 668-W(ICS)), used to compute the amount of wages, salaries, and other income that is exempt from a notice of levy to collect delinquent taxes. The revision, released May 1, accounted for the removal of personal exemptions, which are suspended from 2018 to 2025 under the new tax law ( Pub. L. 115-97). The updated amounts are effective immediately, said James Maslanka, a senior program analyst at the IRS.

The levy notice is sent by the IRS to notify employers of a levy that exists against an employee. The Forms 668-W are to be revised soon. Also to be addressed later is whether each employee subject to a tax levy on wages would be required to submit a new statement to an employer for use with Publication 1494 because of the removal of personal exemptions, Malanska said May 3 during IRS’s monthly teleconference for payroll professionals.

Congress added Section 6334(d)(4) to the Internal Revenue Code as part of the tax code overhaul. The section identifies property exempt from levy.

To contact the reporter on this story: Christine Pulfrey in Washington at cpulfrey@bloombergtax.com. To contact the editor responsible for this story: Michael Baer at mbaer@bloombergtax.com.

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