Collecting The Levy
The Financial Management Service (FMS) is a bureau of the
Department of the Treasury, to provide a centralized debt
collection service to most federal agencies. The FMS has begun
utilizing two Congressionally mandated federal debt collection
programs. One is devised to collect delinquent non-tax debt by
neutralizing federal payments and the other is to collect
delinquent tax debt from those individuals who receive federal
payments.
The Tax Payer Relief Act of 1997 authorized the IRS to collect
delinquent tax debts from individuals and businesses that
receive federal payments, by levying up to 15% of each payment
until the debt is paid.
Before the IRS transmits an electric file to the FMS, the IRS
will send each tax debtor a notice by certified mail that will
include the tax bill, a statement of the intent to levy, an
explanation of the debtor's rights to appeal, and an IRS phone
number to inquiries and assistance. The intent to levy notice
will also inform the debtor that if arrangements are made to
repay the debt within thirty days of the notice, the levy will
be dismissed.
To those debtors who receive Social Security benefits, a second
notice will be sent as an opportunity to make payment
arrangements to repay the debt and to avoid an IRS levy. As the
payments are made, the FMS will send a notice to the debtor with
explanation of the reduced payment, along with contacting the
IRS to answer any questions regarding past debt. A debtor can
make payment arrangements through the IRS at any time, whether
its before a tax levy is issued or after the tax levy begins, to
be released from an IRS tax levy.
Federal tax debts will be collected by FMS through The Treasury
Offset Program (TOP), a program that is also used to collect
non-tax debt. The TOP database, which is maintained by FMS,
includes delinquent debtor information that has been submitted
by federal agencies. As with the tax levy program, the IRS will
supply the FMS with an electronic file containing tax debt
information to be compiled in the TOP database.
FMS will match the federal payment information with the TOP
database and the contact the IRS if they find any matches that
would specifically identify any debtors that are recipients of
Social Security benefit payments. The IRS will then send a
notice of levy to the FMS to reduce matched payments
continuously at a rate of 15% until the debt is paid, until
other repayment arrangements are made, or until the expiration
of the statutory collection period.
In February of 2002, the FMS started reducing the IRS
garnishment amounts of Social Security beneficiaries who owed
delinquent federal tax debts, by sending the IRS the levied
amounts and sending the balance of the payments to the tax
payer.