TN 30 (11-10)

GN 02410.105 Exemptions from Levy

A. Background on exemptions for IRS levy

The Internal Revenue Service (IRS) exempts a limited amount of a delinquent taxpayer's total income from levy so that the taxpayer and his family are not deprived of subsistence income.

The exemptions used in the levy of Social Security benefits are the same as those claimed for tax purposes and may not be equal to the number of auxiliaries entitled to benefits on a claim.

If a taxpayer/beneficiary has income other than Social Security benefits, the IRS may apply the exemptions to the other income and levy the full amount of the Social Security benefits.

B. Policy on exemptions for IRS levy

The IRS Publication 1494 (http://www.irs.gov/pub/irs-pdf/p1494.pdf ), provides the taxpayer/beneficiary named on the Notice of Levy entitlement to a personal exemption, determined by tax filing status, as follows:

  • Single - $845.83, plus $129.17 if age 65 or blind or visually impaired. If both age 65 and blind or visually impaired, the additional $129.17 exemption is doubled.

  • Unmarried Head of household - $1087.50, plus $129.17 if age 65 or blind or visually impaired. If both age 65 and blind or visually impaired, the additional $129.17 exemption is doubled.

  • Married Filing Jointly (and qualifying widow(er) s) - $1362.50, plus $100.00 if age 65 or blind or visually impaired. If both age 65 and blind or visually impaired, the additional $100.00 exemption is doubled.

  • Married Filing Separately - $845.83, plus $100.00 if age 65 or blind or visually impaired. If both age 65 and blind or visually impaired, the additional $100.00 exemption is doubled.

Use the exemption status provided by IRS on form 668W when processing the levy via the IRS Tax Levy Data Base System (TAXY) and the system will automatically apply the appropriate exemption amount.

If both the wage earner and spouse are tax liable (as indicated by both being named on a single levy form or each being named on separate levy forms), each is entitled to a personal exemption. However, a person entitled to an exemption on one account cannot be entitled to an exemption on another account.

Example:

  1. A spouse cannot have a personal exemption on her own account and a dependent's exemption on her husband's account; or

  2. A child cannot have a dependent's exemption on both parents' accounts.

C. Procedure on exemption for IRS levy

1. IRS does not specify exemptions

If exemptions are not specified on the notice of levy, there is no attachment addressing exemptions or a statement that exemptions do not apply is not submitted:

  • Establish levy per the 668W request via TAXY using exemption Part 1, option D=DEFAULT (see SM 00833.035 and SM 00833.045). TAXY will automatically send the beneficiary a “Statement of Exemptions” to complete so that SSA can determine the correct amount of exemptions.

  • Annotate the Special Message Field on the MBR to show that benefits are being levied with exemptions set to DEFAULT status. (See GN 02410.110.) Be sure to update the special message field with any changes to the exemption amount.

  • If the exemption statement is returned, use the exemption status provided by the beneficiary and process the levy via TAXY to establish the amended exemption status to the next benefit payable. Do not question the number of dependent's exemptions claimed; IRS will take any action it deems necessary against the taxpayer/ beneficiary to correct improper claims for exemptions.

2. IRS does not allow exemptions

If IRS wishes to attach the beneficiary's entire benefit amount, they will annotate the notice of levy (or include an attachment) with a statement to the effect that the taxpayer identified in the notice of levy is not entitled to the exemptions. Do not solicit exemptions in these cases.

If SMI premiums are involved, be sure that action is taken to withhold them. We do not want to have to bill the individual.

3. Total exemptions exceed benefit

If the total amount of exemptions, per GN 02410.105B above, exceeds the amount of benefits due at the time of service, TAXY input will result in an alert in the Payment Center (PC). Return the notice of levy to the issuing IRS office using the notice in NL 00703.745. You will also notify the person using the notice in NL 00703.749.