5.11.2. Serving Levies, Releasing Levies and Returning Property

(1) The procedures in this IRM are designed to ensure that levy actions comply with law and IRS policy statements; in particular,IRC 6343 and the taxpayer bill of rights. More specifically, this IRM section provides revenue officers, collection advisors and specialty collection insolvency advisors with directions regarding how to complete levy actions. .

(2) The Bipartisan Budget Act of 2018 allows amounts, including interest, returned to an individual from the IRS pursuant to a wrongful or erroneous levy on an IRA or employer-sponsored plan to be contributed to the IRA or employer-sponsored plan without regard to the general contribution limits. This new law is effective for amounts returned to individuals in taxable years beginning after December 31, 2017. The law added IRC 6343(f), Individuals Held Harmless on Wrongful Levy, etc. on Retirement Plan.

(1) Authorities relating to this section include:

• IRC 6330 - Notice and opportunity for hearing before levy

• IRC 6331 - Levy and distraint

• IRC 6332 - Surrender of property subject to levy

• IRC 6333 - Production of books

• IRC 6334 - Property exempt from levy

• IRC 6343 - Authority to release levy and return property

• IRC 6503 - Suspension of running of period of limitation

• Treasury Regulations 301.6330-1 - Notice and opportunity for hearing prior to levy

• Treasury Regulations 301.6331-1 - Levy and distraint

• Treasury Regulations 301.6332-1 - Surrender of property subject to levy

• Treasury Regulations 301.6332-2 - Surrender of property subject to levy in the case of life insurance and endowment contracts

• Treasury Regulations 301.6334-1 - Property exempt from levy

• Treasury Regulations 301.6343-1 - Requirement to release levy and notice of release

• Treasury Regulations 301.6343-3 - Return of property in certain cases

• Revenue Procedure 2010–16, Definition of Last Known Address

• IRM 1.2.1.6.1, Policy Statement 5-1, Enforcement is a necessary component of a voluntary assessment system

• IRM 1.2.2.4.1, Delegation Order 3-1 (Rev. 2), Credits and Refunds

• IRM 1.2.2.6.3, Delegation Order 5-3 (Rev. 1), Levy on Property in the Hands of a Third Party (not to include Levy Form 668-B)

• 11 U.S.C. § 362(a)

(1) The Director, Collection Policy is responsible for all policies within the levy program.

(2) The National Program Manager, Enforcement is responsible for development and delivery of policies within the levy program.

(3) Managers of employees who issue levies are responsible for ensuring these procedures are followed and employee actions are timely and accurate.

(4) Revenue officers, collection advisors and specialty collection insolvency advisors are responsible for following the procedures in this IRM.

(1) Integrated Collection System (ICS) is used by field revenue officers as a method for generating levy documents that are issued to third party levy sources.

(2) The Collection Activity Reports (CAR) report number 5000–24 records the total number of levies issued. Total Levies are the sum of Field, SB/SE ACS and W & I ACS (monthly and cumulative). The data sources are the ACS Customer Service Activity Reports (CSAR) - Monthly Support Site Report (ACS Levies) and ICS (Field Levies). See IRM 5.2.4.11, Levy and Seizure Report (Report Symbol NO-5000-24). The IRS has determined that levy data may be made available as national statistics, provided that such data will never be used to evaluate any employee or to suggest or impose production quotas or goals. See IRM 1.5.2, Managing Statistics in a Balanced Measurement System, Uses of Section 1204 Statistics.

(3) Levy program numbers are published yearly in the IRS Data Book, Enforcement: Collections, Penalties & Criminal Investigation, in Table 16 at https://www.irs.gov/uac/enforcement-collections-penalties-criminal-investigation

(4) Targeted program reviews are periodically performed by Collection Policy to determine whether IRM guidance requires clarification or revision.

(5) Management will ensure program effectiveness through managers' case reviews, operational reviews conducted by the territory, Area, and Field Collection Director, and NQRS reviews.

(1) National Quality Review System (NQRS), attribute 417, Managerial Approvals for Enforcement provides independent collection review information from which management may draw inferences regarding overall case quality for this attribute. See IRM 5.13.1, Embedded Quality Administrative Guidelines.

(2) Embedded Quality Review System (EQRS), Collection managers use EQRS, attribute 416, Appropriate Enforcement Tools, and attribute 607, Taxpayer Rights to complete all case reviews for revenue officers.

(3) Certain notices of levy must be approved by managers. See IRM 1.2.2.6.3, Delegation Order 5-3 (Rev. 1), Levy on Property in the Hands of a Third Party (not to include Levy Form 668-B).

(4) Certain manual refunds must be approved by managers. See IRM 1.2.2.4.1, Delegation Order 3-1 (Rev. 2), Credits and Refunds.

(5) Programming safeguards are built into the ICS system to prevent a levy from being generated on a module where the required notices have not been issued.

(1) Terms and acronyms associated with the field levy program include:

(2) See Exhibit 5.11.2-1 for list of acronyms.

(1) The ICS User Guide, Chapter 10 - Levy details all the functions necessary to maintain levy sources, issue levies and final demands, and close or release levies. See http://mysbse.web.irs.gov/collection/collsystems/ics/guides/default.aspx

(2) The National Levy Source Look-Up web page provides up-to-date levy source name and address information. See https://acsweb.enterprise.irs.gov/nlsweb/pages/nl08.xhtml.

(3) The MySB/SE, Enforcement web page provides access to various information and job aids related to the levy program. See http://mysbse.web.irs.gov/Collection/toolsprocesses/Enforcement/default.aspx.

(4) The Taxpayer Bill of Rights (TBOR) links to listing of those rights that already existed in the Tax Code, putting them in simple language and grouping them into 10 broad categories. See https://www.irs.gov/taxpayer-bill-of-rights. For additional information see IRM 1.2.1.2.36, Policy Statement 1-236.

(5) Below are recommended resources, which can be used to address questions on levy guidance.

(1) Serve a levy only when there is reason to believe the third party is holding the taxpayer's property or owes a debt to the taxpayer.

1. If the taxpayer owns property with a person not liable for the tax, consider using another source.

2. Any property in which the taxpayer has an interest is subject to levy, even if the property is jointly owned with another person (e.g., community property, jointly owned bank accounts). However, because wrongful levy suits and claims can result from such levies, consider levying on another available source.

(1) Prepare the levy form that contains the most appropriate instructions for honoring the levy. A notice of levy attaches to a taxpayer’s property held by a third party as reflected on the specific levy form.

1. Use Form 668–W, Notice of Levy on Wages, Salary, and Other Income to levy an individual's wages, salary (including fees, bonuses, commissions, and similar items) or other income. Other income is generally income owed the taxpayer as the result of personal services in a work relationship. See IRM 5.11.5.4.6, Severance Pay, for an example of other income. Form 668-W is also used to levy on a taxpayer's benefit or retirement income.

2. Use Form 668–A, Notice of Levy, to levy other property that a third party is holding. For example, this form is used to levy bank accounts and business receivables.

3. Use Form 668-R to levy retirement assets, as follows:

(2) Include all appropriate TINs on the notice of levy. For example, include both the SSN and EIN of a sole proprietor, if they are known. Include both SSNs on a joint income tax liability. ICS users should enter this information in the "Remarks" field. See (4) below.

(3) When the TIN is not needed by the levied party to identify the taxpayer’s assets, the TIN should be redacted from the notice of levy.

(4) If additional information will help identify the taxpayer's property, include it on the levy. ICS users should enter this information in the "Remarks" field. This may include:

• Contract number

• Merchant account number

• Franchise number or operator

• Co-signer's name

• Royalty owner

• Location of the branch where the taxpayer works

• Any other descriptive information

(5) ICS programming will automatically exclude individual SRP modules (MFT 35 or mirrored MFT 65) from systemically prepared Notice of Levy.

(6) If there is a joint assessment, and there is a restriction that prevents levy against one of the taxpayers' property, include both taxpayers' names on the notice of levy or in the "Remarks" field, but only include the SSN of the taxpayer on whose property you are levying.

1. State on the notice of levy or in the "Remarks" field, "This levy attaches the property and rights to property of (taxpayer's name). It does not attach the property and rights to property of (other taxpayer's name)."

   Example: Fred and Janice Blue filed a joint return and owe $3,000. They are divorced now. Janice has filed bankruptcy and the automatic stay prohibits levy on her property. Fred is not a party to the bankruptcy. His property can be levied. When a notice of levy is prepared to collect from Fred, the taxpayer name line will still include both taxpayers' names. However, the notice of levy will also state, "This levy attaches the property and rights to property of Fred Blue. It does not attach the property and rights to property of Janice Blue."

2. In some states, the taxpayer whose property rights are being levied may have a community property interest in the property of a spouse, and there may be a restriction which prevents levy on that spouse's property. See IRM 5.11.6.13, Levy on Non-Liable Spouse in a Community Property State. In the example above, other language may need to be added to the notice of levy explaining that Fred Blue's property rights that are being levied include Fred's community property interest in Janice Blue's property, although her property rights are not being levied. The result is similar to what would be levied if there were an assessment only against Fred, but his community property interest in Janice's property is being levied.

   Note: Per IRM 5.11.6.13(2), before issuing a levy on community property, contact Collection Advisory for advice on the impact of a divorce, separation and any special language or inserts/cover letters needed with the levy, unless local instructions have already been issued for how to handle these levies.

(7) When levying on the property of a partnership, the levy form will reflect the name of the partnership.

(8) When levying on the property of a partner for the partnership debt, you can add a statement to the "Remarks" field of the levy application such as, "This notice attaches to all property in the name of (name of partner, TIN, [general] partner)."

(9) If the taxpayer's identification number is not needed by the levied party to identify the taxpayer's assets, redact it from the appropriate parts of the levy form. Examples of assets for which the taxpayer's identification number may not be necessary for the levied party for identification are:

• Account or Note Receivable

• Rental income

• Chose in action, e.g., a right to recover money or right to pursue a lawsuit

(10) A revenue officer is not required to physically sign a levy or a levy release. However, these documents must be executed by a person acting under the authority of the Secretary of Treasury. Any signature method that reliably authenticates these documents may be used. For example, a facsimile (stamp) of a revenue officer’s signature stamped by a group secretary may be effective to show a collection document is properly authorized.

(11) A written signature, stamped signature, electronic signature, or systemically printed signature is an acceptable representation of the authority to issue or approve a levy or levy release.

(12) When the use of an electronic signature method is determined to be appropriate during the levy review process described in IRM 5.11.1.3.5, the following actions should be taken:

1. The specific forms/letters requiring approval and/or signature must be converted/scanned to .PDF format..

2. Internal use documents and forms, including Form 13719, Pre-Seizure Checklist and Approval Request, and the memorandum required in IRM 5.11.1.3.5, Managerial Approval, may be signed (certified with visible signature) using the approval signature method, yet any enforcement document being provided to the taxpayer should include a graphic signature in the signature block. Specific instructions on how to include an image of your handwritten signature in the digital signature selections are available via Adobe Acrobat Help, How to Sign, Create a Signature Appearance.

3. The manager must either write the approval in the ICS history, or a copy of the manager’s written approval must be kept in the case file. See IRM 5.11.1.3.5.

(13) Centralized printed levies sent to Correspondence Production Services (CPS) will be generated with the revenue officer’s systemically printed signature which is legally sufficient.

(14) Prior to serving the locally generated notice of levy, print and retain in the Collection case file the IRS File Copy of the levy. For Form 668-(A) , Notice of Levy, retain part 5 and for Form 668-(W), Notice of Levy on Wages, Salary, and Other Income, retain part 6. Systemic notice of levies mailed through CPS will print a levy copy for the case file.

(1) When a notice of levy is served in person, have the recipient sign for it. Write, "Receipt Acknowledged," on the form, and have the person sign after this. If the person will not sign it, leave the form anyway. Document the case file to show the levy was served. And document the recipient's refusal to sign an acknowledgement, if applicable. An acknowledgment is desirable, but it is not critical.

(2) If the levy source is a partnership or a corporation, try to serve the levy on a partner or corporate officer.

(3) Try to find out how much to expect from the levy. Ask for payment when the levy is served, unless there is a reason for a delay, such as,

• IRC 6332 (c) requires banks to wait 21 days

• A levy on wages is not paid until the taxpayer's usual pay day

(4) If payment must be sent later, supply a business reply, self-addressed envelope. Supply more envelopes if there will be several payments.

(5) If nothing is owed to the taxpayer, have this written on the form. Ask the person to sign it and write their title, e.g., partner, vice-president, etc.

(1) Treasury Regulation 301.6331–1(c) permits notice of levy to be served by mail.

• Print, "Notice of Levy," on the envelope used to mail levies. This helps large employers and banks route the levy to the right office.

• Include a business reply, self-addressed envelope.

(2) Starting in January 2018, ICS added a new feature to allow Form 668-A and Form 668-W to either generate the levy locally or print and mail from the CPS sites. Generally, notice of levy are processed by either Detroit - CPS (East) or Ogden - CPS (West). ICS generates outgoing notice of levy daily for items requested in ICS real-time. The levy is printed and mailed from the CPS site within three business days of CPS receiving the file excluding weekends and Holidays.

(3) When a levy must be served quickly, a fax (either by fax machine or eFax) can be used. First, confirm the person has a fax machine and will accept the levy this way. Document that the levy source agreed to accept the levy by fax. Once the levy source agrees to accept levy by fax, that agreement applies equally whether the levy by fax is made from a legacy fax machine or by eFax.

(4) The use of eFax is not limited to situations where a levy must be served quickly. In addition, revenue officers do not have to contact third parties that have agreed to receive delivery of levies through eFax to a centralized Fax number they have identified. The listing of third parties that have agreed to receive eFax can be found at Electronic Levy Information web page http://mysbse.web.irs.gov/collection/toolsprocesses/Enforcement/Levy/elevy/default.aspx. Each eFax levy will:

• Be faxed to a centralized point of contact and fax number as directed by the third party

• Be electronically signed by the approving IRS employee

• Include a fax cover sheet containing the name and eFax number of the IRS employee faxing the levy

Note: Use of eFax to serve levies is preferred over regular fax and mail.

Caution: When serving a levy through eFax, do not mail a copy to the levy source. If mailed the levy source may mistake the copy for a new levy.

(1) Some financial institutions, businesses, and government agencies identify one address to be used when sending levies. The financial institution, business, or agency must notify the area director in writing. Consider keeping a central index in the area for these addresses. Then, they can be distributed to all collection employees in the area.

(2) Consider whether other areas and campuses need to know the address. Some large companies and government agencies may get levies from all over the country. Levy Source Information on the Servicewide Electronic Research Program (SERP) under Who/Where provides up-to-date levy source name and address information.

• If a bank gives an address for its levies, ask for its EIN and its American Bankers Association (ABA) transit number.

• Send the requests, including the EIN and ABA number, to the area office. If the area agrees the information belongs on SERP's Levy Source Information, it will be sent to Headquarters to the Director, Collection Policy, SE:S:C:HQC:P:E, Attn: Levy Analyst, 2001 Butterfield Road 11th Floor, Downers Grove, IL 60515-1050

(3) A computer program uses the EIN and ABA number to overlay these addresses for many levy sources; however, it is not always able to do this. For example, the updating of the address depends on IDRS having the levy source's EIN or ABA number. Some levy sources do not have these numbers, so sources must still be checked against Levy Source Information on SERP.

(4) Revenue officers can also access National Levy Source (NLS) database through shortcut folder under "ACS NLSWeb" .

(1) When a taxpayer has property in another territory, either,

1. Mail the notice of levy

2. Go to the other territory if it is nearby, or

3. Initiate a Courtesy Investigation, see IRM 5.1.8, Courtesy Investigations.

(2) The receiving territory may find other levy sources. If so, other levies may be served after checking with the originating territory.

(1) After serving a levy in person or faxing it, mail a copy to the taxpayer. Form 668-A and Form 668-R includes two taxpayer copies. Mail Part 4 to the taxpayer. Leave Part 2 with the person who receives the levy. ACS and centralized printed ICS levies uses Form 668–A and mails to the taxpayer Form 8519 (ACS), Taxpayer's Copy of Notice of Levy. Form 8519 will be printed and mailed from the CPS site within five business days of receiving the file

(2) If the levy is mailed locally, do not send the taxpayer copy immediately. Wait long enough so the taxpayer does not get the levy before the levy source does. Consider local experience with mailing times and the promptness of a particular entity's compliance.

(3) When a DETL or FEDCON levy is issued the taxpayer must be provided with a copy of the levy and the appropriate post-levy CDP rights letter. CPS does not issue the Letter 1058-D, Post Levy Collection Due Process (CDP) Notice or Letter 1058-F, Post Levy Federal Contractor Collection Due Process. When the levy is generated locally or through CPS the revenue officers must insure the post-levy CDP rights letter and levy copy is provided. See IRM 5.11.1.5, Post-Levy Actions - Disqualified Employment Tax Levy, or IRM 5.11.1.6, Post-Levy Actions - Federal Contractor Levy.

(4) Also, see IRM 5.11.6.13.2, Notice to the Non-Liable Spouse, when a taxpayer's community property interest in a non-liable spouse's property or right to property is levied.

(5) Also, see IRM 5.1.23.3.2.3, Written Communication to a Taxpayer’s Representative, to ensure that the POA is authorized to receive taxpayer data on all modules contained in the copy of the levy you plan to send to the POA. Systemic notice of levy mailed from CPS will not generate a copy to the POA since they are unable to determine if the POA is authorized for all the modules on the levy. Therefore, levies issued through CPS will not provide a copy to the POA.

(1) Records about taxpayer property must be provided, if requested by the IRS, when a levy is served or is about to be served. See IRC 6333 . A summons could be used, but it may be unnecessary. Sometimes, a cooperative person will show the records if something in writing is given.

(2) Use Letter 6097, Notice to Exhibit Books and Records. Do not describe Letter 6097 as a summons. Note the date and time the form is served. Also, note the person who receives it.

(1) If a person refuses to surrender the property, advise them of the provisions of IRC 6332:

• Requires the property to be surrendered

• Discharges the person from any liability to the taxpayer and anyone else, and

• Describes the person's liability if the levy is not honored

(2) If the person still refuses, serve Form 668-C, Final Demand for Payment..

(3) A Notice of Federal Tax Lien is not required before serving Form 668-C. However, if a suit to enforce the levy is likely, then file the lien.

(4) If Form 668–C is served in person, try to serve it on the same person who received the levy. Complete the Certificate of Service on Part 1. Try to get a signature at the bottom of the form to acknowledge it was received.

(5) If Form 668–C is mailed, send it by certified mail. Indicate NA in the Certificate of Service on Part 1 & 2.

(6) Allow the third party 5 days to respond to Form 668-C, Final Demand for Payment, before taking action to enforce IRC 6332.

(7) Additional information can be found in IRM 5.17.4.12, Action to Enforce a Levy, IRM 3.17.243.10.1, Monies Collected by the Department of Justice, and IRM 25.3.5.4, Advisory Procedures for Judgments for Assessed and Unassessable Liabilities, for processing the penalty recoverable under IRC 6332(d)(2).

(1) Under IRC 6343(a)(1) requires levies to be released when the Service determines the circumstances in this section discussed below exist. Per Treas. Reg. 301.6343-1(a) the Service may require any supporting documentation as is reasonably necessary to determine whether a condition requiring release exists.

(2) Release the notice of levy as soon as one of the circumstances in this section is identified to prevent payments from being received after the notice of levy should have been released. This will avoid the need to return levied property and the inconvenience this may cause for the taxpayer.

(3) Section 362(a) of the Bankruptcy Code (Title 11) prohibits levy on the property of a taxpayer in bankruptcy. Generally levying on property when the taxpayer is in bankruptcy violates the automatic stay and the levy must be released. Employees must contact Insolvency immediately if inadvertently a levy is placed on property of a taxpayer in bankruptcy. The Service must initiate corrective actions within two workdays of learning of an actual or potential stay violation.

(4) Any notice of levy that violates the Internal Revenue Code or regulations must also be released, e.g., a levy issued while the taxpayer's CDP hearing is pending.

(1) The IRC distinguishes between "wrongful" levies and other types of improper or "erroneous" levies.

(2) A "wrongful levy" is one that improperly attaches property belonging to a third party in which the taxpayer has no rights. See IRC 6343(b). The Code specifically authorizes release of wrongful levies. See IRM 5.11.2.3.2.1 below for wrongful levy procedures.

(3) An "erroneous" levy is one that properly seeks to capture a taxpayer's property (rather than a third party's property), but, for example, is served prematurely or otherwise in violation of an administrative procedure or law. See IRC 6343(d), IRM 5.11.2.3.2.3 and IRM 5.11.2.4.1 below for erroneous levy procedures.

(1) Generally, levy releases are mailed to save resources. Sometimes, though, they may be served in person.

(2) When a levy must be released quickly, it may be faxed. Confirm that the levy source has a fax machine and is willing to accept a faxed release.

(3) When paper levies issued to the Social Security Administration (SSA) need expedited release, print "EXPEDITE IMMEDIATELY" on the top of the release of levy form. Fax the release to the SSA office that issued the taxpayer's social security number. See the Servicewide Electronic Research Program (SERP), Who/Where, Levy Source Information for the SSA office fax numbers:https://acsweb.enterprise.irs.gov/nlsweb/pages/nl08.xhtml. Phone contacts for SSA Paper Levy issues are listed on SERP on the IRWeb, Who/Where, SSA Paper Levy Contacts: http://serp.enterprise.irs.gov/databases/who-where.dr/ssa-paper-levy-contacts.html.

(4) To reduce delay, release of levy may be issued without third-party contact notice.

(1) Use Form 668–D, Release of Levy/Release of Property from Levy, to release a levy served on Form 668-A, 668-W, or 668-R. Use Form 668–E, Release of Levy, to release seized property when Form 2433, Notice of Seizure, cannot be used.

(2) Form 668–D can be used to release the levy in part or in full.

(3) Individual tax modules may be released from a levy. Use the Form 668-D, Release of Levy/Release of Property from Levy, section that is appropriate to the type of levy issued and enter the amount still due after removing the erroneous module. Add note below this section that identifies the module released.

(1) Taxpayers can make tax payments by credit card. See IRM 21.2.1.48.3, Payment by Credit Card, Debit Card or Digital Wallet (General). Credit card payments are a source of guaranteed funds; the line of credit is authorized before the confirmation number is issued.

(2) If releasing a levy when the taxpayer states they paid by credit card, secure the confirmation number. The confirmation number is provided to the taxpayer by the service provider at the end of the transaction.

(3) Additional payment verification can be obtained by the taxpayer on the service provider's website.

(4) While rare in instances of tax payments, fraudulent use of credit cards does occur and will result in a manual refund of the payment to the processor.

(1) A person may inappropriately provide a Taxpayer Identification Number (TIN) that is not their own to an employer to secure employment. This person will be referred to in this section as the non-owner of the TIN. The legal owner of the TIN will be referred to in this section as the victim.

(2) Cases involving multiple taxpayers using the same TIN are classified generally as mixed entity, Scrambled SSN cases or True Scrambled SSN cases. These cases will be referred to in this section as mixed entity cases.

(3) A levy attaching the assets of the victim in a mixed entity case must be immediately released. Accounts should be adjusted and all pre-levy notices properly issued before levy re-issuance. See IRM 5.1.28.4, Collection Activity in Identity Theft Cases, for actions after levy release. See IRM 25.23.2.5.2, Statute Protection - Multiple Returns, for appropriate adjustment actions.

(4) A levy attaching to assets of the non-owner of the TIN for which

• the Service assessed the liability in the name of the non-owner of the TIN,

• the Service issued all pre-levy notices properly to non-owner of the TIN,

• the Service assessed the liability under the TIN/SSN of the victim,

• the assessment is based solely on the income of the non-owner of the TIN,

• and there are no credits (payment offset etc.) attributable to the victim for the assessment listed on the levy,

(5) The non-owner of the TIN may file a wrongful levy claim for return of levy proceeds (from the assets of the non-owner of the TIN) already received and processed by the Service. A wrongful levy claim may be appropriate when

• the assessment is based solely on the victim's income, since the levy improperly attaches to property belonging to a third party (the non-owner of the TIN)

• the assessment is based on the combined income of the non-owner of the TIN and the victim's, since the levy may have improperly attached to property belonging to a third party (the non-owner of the TIN).

• the assessment is based on the combined income of the non-owner of the TIN and the income of other non-owners using the TIN, or is based on the combined income of other non-owners using the TIN and the victim’s income, since the levy may have improperly attached to property belonging to a third party (the non-owner of the TIN).

(6) The levy is considered an erroneous levy when a levy is served prematurely or otherwise in violation of an administrative procedure or law. If the levy is in violation of law the Service must return levy proceeds. If the levy is in violation of administrative procedure the Service may determine to return levy proceeds. Contact Collection Advisory to verify the levy is erroneous. See IRM 5.11.2.3.2, Wrongful and Erroneous Levies, for appropriate action.

(1) On July 30, 1996, Taxpayer Bill of Rights 2 (TBOR2) was enacted. This added subsection (d) to IRC 6343.

(2) Now erroneous levy proceeds can be returned to the taxpayer at the discretion of the Service if:

• The levy is premature

• IRS procedures were not followed.

  Example: Some companies notify the Service of an address for mailed notice of levy. See IRM 5.11.2.2.5, Addresses for Mailing Notice of Levy. A levy is sent to another address by mistake. The company forwards it to the correct address, and a levy payment is sent. The taxpayer might claim the payment must be returned because procedures were not followed. This is not the case. It is within the discretion of the Service to determine that the error is trivial and returning the payment is unwarranted.

  Note: The same procedures for making a claim for return of levy proceeds when a wrongful levy has occurred under IRC 6343(b) apply to IRC 6343(d), except interest is allowed in the case of a wrongful levy.

(3) Erroneous levy proceeds will be returned to the taxpayer if the levy is in violation of the law per Treas. Reg. 301.6343-3(d). However, the Service may keep the levy proceeds if the taxpayer provides written permission to do so.

(4) Although not considered erroneous, proceeds from levies can be returned to the taxpayer at the discretion of the Service subject to the statutory time period addressed in (5)] in the following situations:

• An installment agreement is made for a liability included on the levy, unless the agreement provides otherwise.

  Example: Subsequent to the levy, the taxpayer enters into an installment agreement that will full pay the entire outstanding liability. The revenue officer verifies the taxpayer is financially able to meet all the terms of the agreement. An amount of money equal to the amount of money levied and applied toward the taxpayer's liability may be returned to the taxpayer.

• Returning levy proceeds facilitates collection.

• With the consent of the taxpayer or the National Taxpayer Advocate (NTA), returning the levy proceeds is in the best interests of the taxpayer (as determined by the NTA) and the government.

  Example: Taxpayer owes income tax for 2008 and 2009. IRS issues a levy to attach to social security benefits. Taxpayer responds to a levy and a collection information statement is completed that IRS determines establishes economic hardship. Further, the taxpayer’s information confirms that the levy created an economic hardship for the taxpayer at the time the levy was initially issued. The IRS releases the levy on the social security benefits. Additionally, an amount equal to the amount levied and applied to the taxpayer’s liability may be returned to the taxpayer unless it is determined the return of property is not in the best interest of the government. Generally, it will be in the best interest of the government to return such payments when the IRS levy created an economic hardship for a taxpayer. However, it is generally not in the best interest of the government to return levy proceeds received prior to the taxpayer’s request for the release of the levy if the facts show that the taxpayer did not respond to IRS attempts to contact them prior to levy and the taxpayer does not have reasonable cause for not responding. In all cases, the individual case facts and circumstances should be considered when determining whether to return levy proceeds received prior to the taxpayer’s request for the release of levy, which includes a request based on economic hardship.

  Note: If multiple levies have been issued with respect to a taxpayer’s liability and only one of the levies has been confirmed to create the economic hardship, only the proceeds from that levy should be returned.

If	Then
IRS makes a determination that return of property is in the best interest of the United States AND in the best interest of the taxpayer with taxpayer consent (no NTA involvement)	IRS will return the levied property.
IRS makes a determination that return of property is in the best interest of the United States and the NTA also determines that return of the property is in the best interest of the taxpayer	IRS will return the levied property.
IRS makes a determination that return of the property in NOT in the best interests of the United States (regardless of NTA determination or taxpayer consent)	IRS will NOT return the levied property.

(5) Specific levied property (including identifiable money such as a coin collection) in the possession of the IRS other than money can be returned at any time. Treas. Reg. 301.6343-3(e). Money includes money levied or the monetary proceeds from the sale of property that has been levied. A taxpayer must request the return of money within a certain time period.

• If the date of levy was on or before March 22, 2017, the request must be made before the expiration of 9 months starting from the date of such levy; e.g., if a levy dated March 12, 2017 was received by the person to be served the levy, the request must be made on or before December 11, 2017.

• If the date of levy was on or after March 23, 2017, the request must be made before the expiration of 2-years starting from the date of such levy; e.g., if a levy dated March 28, 2017 was received by the person to be served the levy, the request must be made on or before March 27, 2019.

(1) Except for a levy in violation of the law (IRM 5.11.2.4.1), there are no rigid rules for deciding whether to return a levy payment. The decision is made on a case-by-case basis. At least one of the conditions in IRM 5.11.2.4.1 (2) must exist. Some things to consider include:

• How significant is the procedural error? In the first example in IRM 5.11.2.4.1(2), the error is harmless and insignificant.

• The IRS released the levy because it determined that the levy was creating an economic hardship.

• Did the person who received the levy get bad instructions about how much to send?

• Is there an error that affects whether the levy should have been issued?

• Is there an inequity in keeping the payment?

• Would the levy have been released if all facts were known before the payment was received?

• Is the taxpayer a pyramiding, delinquent trust fund repeater?

(1) When a written request is rejected, give the taxpayer Letter 3975, Rejection of Request for Return of Levied Property, signed by the group manager.

(2) A written rejection is not required unless a written request is made.

(3) The taxpayer may appeal the rejection using Collection Appeal Program (CAP) procedures, or, if Collection Due Process (CDP) rights exist under IRC 6330(f) and are timely exercised, by raising the issue at a CDP hearing or an equivalent hearing, whichever may be applicable.

(1) The area director is authorized to approve manual refunds via Form 5792, Request for IDRS Generated Refund (IGR), including manual refunds in wrongful levy situations per Delegation Order 3-1 (Rev. 2) contained in IRM 1.2.2.4.1, Delegation Order 3-1 (Rev. 2). By filing Form 14031, Wage and Investment Customer Account Services Submission Processing - Manual Refund Signature Authorization Form, the area director may designate "authorized certifying officers" to review and approve Form 5792. The signature of the area director's designee(s) must be on file with the Submission Processing Center before the Form 5792 is submitted for processing.

(1) Complete and process Form 5792, Request for IDRS Generated Refund (IGR), to issue a manual refund. See IRM 5.1.12.20, Manual Refund, for guidance on completing and processing Form 5792, Request for IDRS Generated Refund (IGR).

(2) Unlike money that has been wrongfully levied, no interest is paid on the refund.

(1) When levy proceeds are returned, the delinquent tax is not forgiven. The taxpayer is still obligated to pay the amount owed, and the Service is obligated to collect it.

(2) However, the taxpayer will not be charged a failure to pay penalty or interest during the period the Service held the money. After the payment is returned to the taxpayer, penalty and interest start to accrue again.

1. Compute accrued interest on $10,000 through April 10, 2008. Then, compute interest on $7,500 for the period April 11, 2008, though May 4, 2010. Assess the total interest from these two steps using transaction code (TC) 340. Have the TC 340 input with the COMP-INT-AMT and INT-TO-DT fields complete. The COMP-INT-AMT is the amount still owed, so IDRS and master file should continue computing interest on this. In this example, it would be the amount still owed on May 4, 2010. The INT-TO-DATE is the date that the interest has been computed through which in this example would be May 4. This will allow IDRS and master file to compute interest after that so it will not have to be done manually.

2. Compute the failure to pay penalty that accrued from April 11, 2008, through May 4, 2010, on $2,500. Input this amount using TC 271 with Reason Code 62. This will allow IDRS and master file to compute the penalty after that so it will not have to be done manually.