The IRS Federal Payment Levy Program (FPLP) is a powerful tool the Internal Revenue Service uses to recover overdue tax debts by seizing federal payments owed to taxpayers. Introduced as part of a collaborative effort between the IRS and the Department of the Treasury’s Bureau of Fiscal Service, the FPLP ensures that individuals and businesses who owe taxes cannot ignore their obligations while still receiving federal funds. The program allows the IRS to bypass traditional collection efforts, such as sending repeated notices or negotiating directly with taxpayers, by directly intercepting eligible federal payments. This streamlined process is particularly effective for collecting significant outstanding debts quickly and efficiently. Here’s an overview of how the FPLP works, its limitations, and how to avoid an FPLP levy.
How Does the FPLP Work?
The FPLP works by matching the IRS’s database of delinquent taxpayers against federal payment records maintained by the Bureau of Fiscal Service. When a match is found, the IRS initiates a levy to seize part or all of the taxpayer’s federal payments. Unlike a one-time levy, which targets a specific payment, FPLP levies are continuous. This means they apply to all eligible payments issued to the taxpayer until the debt is fully resolved or the levy is released.
Types of Payments Subject to FPLP Levies
The FPLP applies to a wide range of federal payments. Common targets include:
- Social Security Benefits: Retirement and disability benefits under Title II of the Social Security Act are a frequent target, though levies are limited to 15% of these payments.
- Federal Salaries and Pensions: The program can levy wages and retirement annuities of federal employees, including military retirees.
- Federal Vendor Payments: Contractors or businesses owed payments for goods or services provided to the government are also subject to levies.
- Travel Reimbursements: Federal employees can even see their travel reimbursements seized.
- Other Federal Benefits: Railroad retirement benefits, military retirement pay, and certain other government benefits may also be intercepted.
Legal Limitations and Protections
While the FPLP is a robust collection tool, it comes with legal safeguards to protect taxpayers from excessive levies. For example, there are limits on Social Security levies. The IRS can take only up to 15% of Social Security benefits through the FPLP, as these are considered essential income. In addition, taxpayers experiencing significant financial hardship may qualify for a reduction or release of the levy. There are also some exempt payments, including SSI or federal student loans, that are protected from seizure under this program.
IRS Notification Requirements
The IRS cannot levy payments through the FPLP without providing prior notice to the taxpayer. Taxpayers receive a Final Notice of Intent to Levy and Notice of Your Right to a Hearing via Letter 1058 or LT11. This informs taxpayers of the IRS’s intention and their rights to challenge it. It also grants the taxpayer a 30-day period to respond. During this time, they can resolve the debt through payment or installment agreements. They may also request a Collection Due Process (CDP) hearing to dispute the levy or propose alternatives. Failing to act within this window allows the IRS to proceed with the levy.
How to Avoid or Stop an FPLP Levy
To avoid or stop an FPLP levy, taxpayers must act quickly. If possible, they should pay the tax debt in full. This is the simplest way to prevent or release the levy. If immediate full payment isn’t feasible, consider other options. One such option is to negotiate an installment agreement. Entering into a payment plan demonstrates a willingness to resolve the debt, often halting levies. Taxpayers can also submit an Offer in Compromise (OIC), which allows you to settle the debt for less than what you owe. If the levy creates undue financial strain, the IRS may release or adjust it via Currently Not Collectible (CNC) status. Supporting documentation, such as proof of income and expenses, is typically required. Finally, the taxpayer may appeal the levy. Request a Collection Due Process hearing within the 30-day notice period to challenge the levy or explore alternatives.
Tax Help for Those Being Levied
Tax debts don’t go away on their own, and programs like the FPLP highlight the IRS’s extensive authority to recover owed taxes. Proactively addressing your debt by negotiating with the IRS can prevent aggressive collection actions and reduce financial stress. Consider consulting a tax professional to navigate this complex process and regain financial peace of mind. Optima Tax Relief has over a decade of experience helping taxpayers get back on track with their tax debt.
If You Need Tax Help, Contact Us Today for a Free Consultation
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