Tax Levy
What is a tax levy and how should employers respond to one?
A tax levy is a legal seizure of property to satisfy a tax debt, including wages. The IRS issues federal tax levies under IRC 6331; state tax agencies issue similar orders. When an employer receives a tax levy notice for an employee, the employer must withhold a portion of wages each pay period and remit to the issuing agency until the debt is satisfied or the levy is released. Tax levies have higher priority than most other garnishments.
Tax levies are one of the highest-priority garnishments an employer handles. When the IRS or a state tax agency sends a Form 668-W (Notice of Levy on Wages, Salary, and Other Income), the employer has a hard timeline to respond and start withholding. Failure to comply makes the employer personally liable for the unpaid tax. Most modern payroll systems handle the mechanics correctly once the levy is loaded, but the response timing and the employee communication still require human attention.
How a Federal Tax Levy Actually Works
The IRS issues Form 668-W after the taxpayer has been notified of the debt and given opportunity to respond. The employer receives Parts 2-5 of the form. Withholding begins on the first wages paid after receipt and continues each pay period until the debt is satisfied or the IRS releases the levy.
How Much Gets Withheld
The IRS uses Publication 1494 tables to calculate the exempt portion based on filing status and dependents from Part 5 of Form 668-W. Whatever exceeds the exempt amount gets withheld. The calculation is different from CCPA garnishment caps; tax levies generally take more.
Priority Against Other Garnishments
Tax levies generally take priority over creditor judgments but can be subordinate to child support orders that pre-date the levy. See garnishment for the broader priority framework.
Handling Tax Levies Without Creating Liability
Respond within the deadline (usually three days after first wages). Use Publication 1494 correctly. Continue withholding until written release. Communicate respectfully with the employee about the deduction. For state tax levies, follow state-specific procedure. IRS reference: Publication 1494.
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