Accounts Receivable Levy

After procedural requirements have been fulfilled by the IRS, it may issue a Notice of Levy (Form 668-A) to the accounts receivable of a delinquent taxpayer.  The Notice of Levy requires the receivable to send any payment to which the delinquent taxpayer has a fixed and determinable right directly to the IRS instead of the taxpayer.  The government will then apply the proceeds of the levy to the taxpayer’s tax debt.  Receivables who disobey the Notice of Levy and send the payable to the taxpayer instead of the government can be hit with expensive penalties.

 

With some exceptions, this type of levy generally does not attach to payments that are dependent upon the performance of future services.  In other words, this type of levy is usually not continuous.

 

Unfortunately, some receivables do not understand that the levy should not be continuous in nature, and will continue sending all future payments to the IRS until the levy is released or the receivable is convinced that the levy is not continuous in nature.  When issuing an accounts receivable levy, the IRS will often issue the levy to all known accounts receivable of a taxpayer, and even customers of the taxpayer from whom no moneys are due.  This type of levy can be extremely damaging to a business taxpayer, as it chokes off cash flow and can damage the relationships that the business has with its customers.  State taxing authorities generally follow similar procedures.
 

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