Employers immune from suit for complying with IRS levy.

• Author: Mansour, Michael P.

When a taxpayer fails to satisfy his or her tax liabilities, the IRS has an array of administrative tools for obtaining taxpayers' compliance. One such method is levying a taxpayer's wages at the source, through the (albeit usually unwilling) participation of the taxpayer's employer. The term "levy" is defined as the power to seize by any means, and Internal Revenue Code provisions require employers to help the IRS in its tax collection efforts. Understandably, employers generally do not wish to become entangled in the private financial affairs of their employees; likewise, employees would prefer not to have their employers involved. This item addresses an employer's rights and responsibilities when required to comply with an IRS wage levy.

Sec, 6332 was enacted to create a legal obligation on third parties to comply with an IRS levy. The statute pinwales, in pertinent part, that "any person in possession of (or obligated with respect to) property or rights to property subject to levy upon which a levy has been made shall, upon demand of the Secretary, surrender such property or rights (or discharge such obligation) to the Secretary." Employers fall squarely within the category of persons required to comply with a levy: Upon levy, the employer must withhold and remit amounts specified in the IRS tables in Publication 1494 until the outstanding tax liability has been satisfied or the levy is released.

Employers who do not comply or refuse to surrender property subject to a levy can be held personally liable for the value of the property not surrendered and may also be subject to a penalty equal to 50% of that property's value (Sec. 6332(d)(2)). Facing such consequences, employers obviously would find if in their best interests to comply.

It is not uncommon in these situations for employees to argue with their employer about compliance with an IRS levy. Employee tactics may range from appealing to the employer's sympathies for the hardship the levy will cause to veiled threats. Employers might...