What is the IRS Federal Payment Levy Program?

If you owe the IRS and now are receiving Social Security income, and if you have allowed your tax debt to fall into a delinquent status, there's a good chance the IRS will begin levying a portion of your benefit income.

This collection action takes place under the Federal Payment Levy Program (FPLP). What is this program, and how can a levy on Social Security or federal retirement benefits be lifted?

In 2000, the IRS initiated the FPL Program in conjunction with the Financial Management Service and the Department of the Treasury. Through this initiative, a continuous levy on certain federal payments disbursed by FMS will be subject to levy.

If the IRS determines that a match is available from your federal payer, and if your tax debt has been turned over to internal IRS collection because of non-payment, a CP-90 notice will be sent, entitled Final Notice, Notice of Intent to Levy and Notice of Your Right to a Hearing.

If you are on Social Security, you will receive a CP-91, Final Notice before Levy on Social Security Benefits. If a Final Notice had previously been sent, you will a receive CP-297.

If you fail to respond within 30 days from the date of the letter, the IRS will communicate with FMS to begin having a portion of your pay levied and applied against your tax debt.

A levy issued through the FPLP will attach 15 percent of your pay, each month, until the tax balance is paid in full or until the IRS agrees to release the levy. According to the IRS, some contract / vendor payments however will be reduced by 100 percent, or the exact amount of tax owed.

In order to have a Federal levy lifted, you will need to contact the IRS directly. Do not call FMS or Social Security. Call the IRS toll-free at 1-800-829-7650 or 1-800-829-3903.

As with any tax levy, the IRS will release the collection action once the tax balance has been satisfied. Absent full-payment, if you contact the IRS to make a repayment arrangement, the IRS will generally lift the levy in lieu of a voluntary monthly installment agreement.

If you are only on Social Security, then you likely have a fixed income and may not be able to pay anything at this time toward your IRS tax bill. Depending on the amount owed, the IRS may need to verify that you are in a financial hardship. Once this has been established, the levy can be released.

Be aware that even when the IRS lifts a levy issued through the FPLP, it takes time for all departments to be notified and to take action. It is not uncommon for at least one more payment to be levied.

More from this Contributor:

Tax filing requirements for retired taxpayers

How to get an IRS levy removed

Can't pay your taxes? You may qualify for Currently Not Collectible status