IRS Tax Levy Calculation

A tax levy is a legal seizure on wages to satisfy a tax debt. Employers generally have at least one full pay period after receiving a notice of levy on wages to begin withholding the required amount. The levy will end when the levy is released, the tax debt is paid, or the time for legally collecting the tax expires.

Upon receipt of an IRS tax levy, an employer should take the following steps:

Immediately give the employee parts 2, 3, 4, and 5 of the wage levy.
Instruct the employee to sign and return the Statement of Exemptions and Filing Status and return parts 3 and 4 to the employer within 3 work days.
Exemptions must be calculated in accordance with IRS Publication 1494 (https://www.irs.gov/pub/irs-pdf/p1494.pdf)

Follow these steps to set up Payroll for IRS tax levy:

Step 1. Set up calculation tables for IRS tax levy

Step 2. Set up calculation formulas for IRS tax levy

Step 3. Set up calculation for IRS tax levy

Step 4. Set up pay code for IRS tax levy

Step 5. Add IRS tax levy pay code to employee

202308, 2023Jul28