The IRS Started Up the Automated Federal Payment Levy Program Again

I’m still talking about this because people don’t seem to be getting it.

I know the IRS hasn’t sent anything to you for like 5 years and so you convinced yourself the tax just disappeared and was never coming back.

That doesn’t make it true, though.

In reality, the IRS resumed sending automated collection notices in January following a lengthy, years long pause to address paper processing backlogs that built up during the pandemic.

When I say “automated collections,” it means that IRS personnel aren’t even looking at your case to decide whether to send threats of enforcing collections by levy and garnishment.

Instead, the IRS computer system is just spitting these letters out to everyone, or some, or….we don’t know how the computer decides who to send these letters to.

It appears to be luck of the draw.

And that makes things even more scary.

Watch Out for the Federal Payment Levy Program Notice

The letter you’re looking for is the letter with teeth.

One that actually means something because once your client gets it, they have 30 days to resolve the balances or file an appeal.

This is the “Final Notice of Intent to Levy” or one of its cousins, including Federal Payment Levy Program (FPLP) notices.

As part of this program, a file of delinquent accounts is transmitted to BFS to be matched against pending federal payments you are due.

When a match is found, they send you a Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing, CP 90 or CP 297.

i.e. the letter with teeth.

The FPLP is an automated process the IRS uses to systemically levy federal payments you’re supposed to receive.

The levy is continuous, which means it doesn’t stop until your overdue taxes are paid in full or you resolve what you owe with a formal agreement with the IRS.

What are these “Federal Payments” That Get Levied?

Federal payments include Social Security benefits, medicare payments (doctors), and others, including the following:

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,

Some federal salaries,

Railroad Retirement Board benefits paid to you.

Military Retirement

The IRS levies these federal payments up to 15 percent, or potentially 100% if the tax owed is less than 15 percent of the payment. Btw, this includes military retirement payments.

The levy amount is more for Medicare Providers like doctors, which went from 15% to 30%, or 100% of tax owed if it is less than 30% of the payment.

Even worse, contract/vendor payments being paid to you are levied 100%.

The IRS is Coming

Meanwhile, the IRS recently announced that they recovered over $1 billion in taxes from high-income, high-wealth individuals under the recently enacted Inflation Reduction Act initiatives.

These are taxpayers who made between $400,000 and $1 million or more than $1 million, but failed to file a tax return, aka “non-filers.”

Prior to the Inflation Reduction Act, the IRS non-filer program ran sporadically since 2016 due to severe budget and staff limitations.

With new Inflation Reduction Act funding, though, the IRS now has the capacity to get after people who were not in danger in previous years.

I have many clients with household incomes of more than $400k and this affects them big time, but if you don’t make that kind of money, don’t over look this.

The takeaway you should come away with is the following quote from the IRS, where they stated, “With new Inflation Reduction Act funding, the IRS now has the capacity” to enforce collections against taxpayers they weren’t able to pursue previously.

Sure, they’re focusing on taxpayers who make over $400k…but let’s see what the data shows when it’s all said and done.

SO…

Tax Professionals: Do you have clients who received a Final Notice of Intent to Levy?

Specifically, do you have clients that receive federal payments that received an LT90 or LT91 Notice from the IRS?

How have you handled these notices?

BTW, if you do get a Final Notice, check out my previous article in Resolving Tax Debt from last week, Proven Strategies to Reduce Your Client's Tax Debt.

https://bit.ly/taxdebtrelief-

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