Overview: The Internal Revenue Service has issued a Notice 1439 that updates the instructions for the three versions of Form 668-W (Notice of Levy on Wages, Salary, and Other Income) to take into account the changes in the wage levy calculation made by the Tax Cuts and Jobs Act (TCJA).
Effective Date: May 2018
Details:
Background:
The IRS generally uses Form 668-W(ICS) or 668-W(C)DO (Notice of Levy on Wages, Salary and Other Income) to levy an individual's wages and salary, including fees, bonuses, commissions, similar items, or other income. A levy is served on the person named on the front of Form 668-W (e.g., the employer). Employers generally have at least one full pay period after receiving a Form 668-W(ICS) or 668-W(C)DO, or other levy form, before they are required to send any funds from their employee's wages to the IRS.
The tax law changes made in the TCJA affect how the IRS calculates the amount exempt from levy. The TCJA, among other things, reduced to zero the deduction for personal exemptions for tax years that began after Dec. 31, 2017 and before Jan. 1, 2026. The TCJA also increased the standard deduction for 2018 to $24,000 for joint filers and surviving spouses, $18,000 for heads of household, and $12,000 for singles and married persons filing separately.
The IRS recently issued a May 2018 version of IRS Publication 1494 (Table for Figuring Amount Exempt from Levy on Wages, Salary or Other Income) to reflect the tax law changes in the TCJA. This calculation is now based on the number of dependents that an individual may claim rather than the number of exemptions.
For a copy of Publication 1494, click on the link provided below.
https://www.irs.gov/pub/irs-pdf/p1494.pdf
Notice 1439:
Notice 1439 includes new instructions that replace the instructions from the three versions of levy Form 668-W from January of 2015. If an employee is subject to levy, their employer is advised to provide them with Parts 2, 3, 4, and 5 of the form to complete as soon as they receive the levy. To claim exemptions, the employee must complete and sign the Statement of Dependents and Filing Status on Parts 3, 4, and 5, and return Parts 3 and 4 to the employer within 3 work days after the employer receives the levy. The IRS has renamed the Statement of Exceptions and Filing Status to Statement of Dependents and Filing Status, to take into account the tax law changes in the TCJA.
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The employee indicates his/her filing status (single, head of household, married filing jointly, married filing separately, or qualifying widow(er) with dependent child) on the Statement of Dependents and Filing Status. The employee must list each dependent that he/she will claim. The employee must also provide each dependent's Social Security Number (SSN) and relationship (qualifying child or qualifying relative). If an employee does not provide an SSN, the dependent is not allowed unless "less than six months old" is written in the blank SSN field. The IRS notes that employees may not claim themselves or their spouse as a dependent.
If the employee or the employee's spouse is at least 65 years old and/or blind, the employee may claim an additional standard deduction amount on the Statement of Dependents and Filing Status.
Once the employer has received Parts 3 and 4 of Form 668-W from the employee, the IRS advises using the first table provided in IRS Publication 1494 to calculate the amount of wages exempt from the levy. If the employee has entered an amount on the Statement of Dependents and Filing Status, the employer must use Item 2 of IRS Publication 1494 to compute the additional amount exempt from levy.
If the employee does not complete Form 668-W Parts 3 and 4, the employer should compute the amount exempt from levy based on a “married filing separate” status with no dependents. Employers should not use the information provided on the employee's Form W-4 to determine the amount that is exempt from levy.
If an employee’s number of dependents or filing status change while the levy is still in effect, the employee may file another Statement of Dependents and Filing Status with the employer to change the amount that is exempt.
If an employer is sending payments for this levy next year, the amount exempt will not change simply because the amount that all employees can deduct for dependents, filing status, and additional standard deductions has changed for the new year (e.g., due to inflation). However, if the employee asks to recalculate the amount exempt in the new year by submitting a new Statement of Dependents and Filing Status, the employer may use the new year’s exemption table—even though there may be no change from the prior statement. This change applies to previous levies, as well as this one.
For a copy of Notice 1439, click on the link provided below.https://www.irs.gov/pub/irs-pdf/n1439.pdf
Call to Action: Please contact your Service Team with questions.