Annotations- Net Pay

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6334 Annotations: Net Pay- Levy

 

Property Exempt from Levy: Net Pay

 

 

Letter Ruling 8149061, September 11, 1981

Uniform Issue List Information:

UIL No. 6331.00-00

Levy and distraint

UIL No. 6331.03-00

Levy and distraint

- Administrative policy

UIL No. 6631.11-00

UIL No. 6334.00-00

Property exempt from levy

This is in reply to your letter of June 9, 1981, requesting a ruling as to which, if any, of the items listed below may be deducted from the employee's earnings in arriving at the amount of wages, salary and other income against which a levy attaches.

As an employer of over 17,000 employees, Taxpayer often receives a 'Notice of Levy on Wages, Salary and other Income', Form 668-W, from the Internal Revenue Service with respect to a particular employee. Taxpayer allows as many of the following payroll deductions as are appropriate to that particular employee to arrive at 'net pay' against which Taxpayer then computes the amount exempt from levy based on the number of exemptions claimed on the 'Statement of Personal Exemptions', Form 668-P, furnished by the employee to the Taxpayer.

1. Federal income tax withholding

2. State income tax withholding

3. Social Security withholding

4. Group health and life insurance premiums

5. Retirement plan contributions

6. Union dues

7. Federal and state income tax liens

8. Court judgments for child support liens

9. United Way deductions

10. U.S. Savings Bonds

11. Credit Union deposits

12. Reimbursement to employer for private use of company owned automobile

13. Tax sheltered annuity deductions

Section 6331(a) of the Internal Revenue Code provides that if any person liable to pay any tax neglects or refuses to pay within 10 days after notice and demand, it shall be lawful for the Secretary of the Treasury to collect such tax (and further sums sufficient to cover the expenses of the levy) by levy upon all property and rights to property (except property that is exempt under section 6334) belonging to such person or on which there is a lien for payment of tax.

Section 6331(d) of the Code provides that the levy under subsection (a) may be made upon the salary or wages of an individual with respect to any unpaid tax. The effect of a levy on wages or salary payable to on received by an individual shall be continuous from the date the levy is first made until the liability out of which the levy arose is satisfied or become unenforceable by reason of lapse of time. The Secretary shall promptly release any levy when the liability is satisfied or becomes unenforceable and shall promptly notify the person upon whom such levy was made that it has been released.

Section 6334(a) of the Code provides in pertinent part that the following property shall be exempt from levy:

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(8) Judgments for support of minor children.--If the taxpayer is required by judgment of a court of competent jurisdiction, entered prior to the date of levy, to contribute to the support of his minor children, so much of his salary, wages, or other income as is necessary to comply with such judgment.

(9) Minimum exemption for wages, salary, and other income.--Any amount payable to or received by an individual as wages or salary for personal services, or as income derived from other sources, during any period, to the extent that the total of such amounts payable to or received by him during such period does not exceed the applicable exempt amount determined under subsection (d).

Subsection (d) provides that in the case of an individual who is paid or receives all of his salary and wages on a basis other than weekly, the amount which is exempt from levy under (a)(9) is an amount determined under regulations which is as close as possible to the amount which would be exempt if he were paid on a weekly basis, i.e., $50 plus $15 for each qualifying dependent. Under section 301.6334-3 of the Regulations on Procedure and Adminstration, the amount exempt from levy if the payroll is biweekly is $100 plus $30 for each person for whom a dependent exemption claim has been submitted to the employer. Notice 110 B is furnished to employers for ease in computing the amount exempt from levy.

The Internal Revenue Service policy with respect to the application of the levy provisions set forth in the Code and regulations is contained in Policy Statement P-5-29, Internal Revenue Manual 1218, Policy Statement Handbook. This policy states:

Except for the statutory exemptions in IRC 6334(a)(8) and (9), a levy legally attaches to the gross amount of the accrued wages or salary. However, in the interest of administrative expediency, a levy will be considered as attaching only to the 'take home' pay of the delinquent taxpayer [employee] unless it is determined that the taxpayer [employee] is voluntarily alloting his/her pay to an extent that would defeat the purpose of the levy.

Accordingly, unless you are notified by the Service to do otherwise, you may consider all thirteen enumerated deductions as allowable in determining the amount of salary and wages against which to apply the amounts determined to be exempt from levy under sections 6334(a)(8) and (9) of the Code and further explained in Notice 110 B.

This ruling is directed only to the taxpayer who requested it. Section 6110(j)(3) of the Internal Revenue Code provides that it may not be used or cited as precedent.

Richard L. Crain
Chief, Estate, Gift, Wage, Excise and Administrative Provisions Branch