If you run payroll and an IRS Form 668-W just landed on your desk, this page is for you. Employees under a levy are often reading it too, and that is fine; understanding what the employer must do helps everyone.
The obligation is not optional
IRC 6332(a) requires any person in possession of, or obligated with respect to, property or rights to property subject to levy to surrender it on demand. Wages you owe an employee are exactly that. Once served, the levy applies to every pay period until the IRS releases it, because IRC 6331(e) makes a wage levy continuous.
The consequences of not complying
IRC 6332(d)(1) makes a person who fails or refuses to surrender levied property personally liable to the United States for the value not surrendered, up to the tax for which the levy was made, plus costs and interest. IRC 6332(d)(2) adds a penalty equal to 50 percent of that amount if the failure was without reasonable cause.
IRC 6332(f) says “person” includes an officer or employee of a corporation or a member or employee of a partnership who has a duty to surrender the property. That can include the individual responsible for payroll.
If an employer refuses to comply, IRM 5.11.5.7 directs revenue officers to consider issuing Form 668-C, Final Demand.
The protection for complying
IRC 6332(e) says a person who surrenders levied property on demand is discharged from any obligation or liability to the delinquent taxpayer and any other person arising from that surrender. If the employee complains that you paid the IRS, the statute is your answer.
Step by step
1. Give the employee the statement, right away
Form 668-W includes a Statement of Dependents and Filing Status for the employee. IRM 5.11.5.4.1 says the employer gives the statement to the employee to complete and return within three days. If it is not returned, figure the exempt amount as married filing separately with no dependents. If the employee returns it later, recompute.
Use the levy statement, not the W-4. IRM 5.11.5.4.1 says so directly.
2. Compute the exempt amount
Use IRS Publication 1494, which the IRS sends with the levy. For levies served in 2026, Publication 1494 (Rev. 12-2025) applies. Find the employee’s filing status, pay frequency and number of dependents, and add any additional standard deduction boxes the employee claimed for age or blindness. For example, a single employee paid biweekly with no dependents has $619.23 exempt per paycheck for 2026.
For irregular payments not tied to your regular payroll calendar, Treasury Regulation 301.6334-3(d)(3) multiplies the weekly exempt amount by the full weeks the payment covers, up to 52. Severance has its own examples in IRM 5.11.5.4.6.
3. Apply it to take-home pay
IRM 5.11.5.4.5 says the levy legally attaches to gross income minus the exempt amount, but by IRS policy only to the employee’s usual take-home pay. Generally keep the deductions that were in place when the levy arrived. Do not allow new voluntary deductions without IRS approval; IRM 5.11.5.4.5 says employers generally should not.
4. Add any court-ordered support exemption the IRS specifies
If the IRS writes a child support exemption on the levy or issues a partial release, follow it. See wage levies and child support.
5. Remit on each payday
IRM 5.11.2 notes that a wage levy is not paid until the employee’s usual pay day. IRM 5.11.5.6.1 says payments should be payable to “United States Treasury” and that the check should show the taxpayer’s name and identification number, the tax periods on the levy and “Levy Proceeds.” The IRS sends Letter 5112 to third parties responding to Form 668-W with payment instructions. Follow those instructions for where to send payments.
6. Keep paying until you receive a release
Stop only when you receive Form 668-D, Release of Levy. The release may be full or partial; a partial release tells you either to pay only amounts above a floor or only a fixed amount. See partial release. When the debt is nearly paid, IRM 5.11.5.6.2 says the IRS sends a Form 668-D one month before the account is full paid, giving the amount needed to finish.
Special situations
- Letter 1697. If it comes with the levy, the IRS is telling you to allow no exempt amount, usually because the employee has another income source providing the exemption. See wage levies with two jobs.
- Centralized payroll. IRM 5.11.5.4.2 lets the IRS send the employer Notice 484 and mail the statement directly to the employee with Notice 483.
- Commissions and bonuses. They are wages for levy purposes under IRM 5.11.5.3.
- Payroll deduction agreements. A Form 2159 is a voluntary payment plan, not a levy. You are not required to accept one unless you are a federal agency, under IRM 5.14.10.2. See payroll deduction vs. levy.
When the employee leaves
A wage levy reaches what you owe the employee. When employment ends, pay the final wages and any severance subject to the levy and the exemption rules for those payments, including the severance examples in IRM 5.11.5.4.6, and then tell the IRS contact on the levy that the employee has left. Keep the levy and your payment records. If the employee returns later, call the IRS contact before resuming payments so you know whether the levy is still in effect.
A worked payroll example
An employee paid semimonthly returns the statement claiming head of household with one dependent and no additional standard deduction boxes. Under Publication 1494 (Rev. 12-2025), the 2026 exempt amount is $1,006.25 plus $220.83, or $1,227.08. Her usual take-home pay after existing deductions is $1,950.00. Payroll remits $722.92 to the United States Treasury on each payday, with her name, TIN, the tax periods and “Levy Proceeds” on the remittance, and pays her $1,227.08. If she later files a new statement adding a second dependent, payroll recomputes: the exempt amount rises to $1,447.91 and the remittance falls to $502.09.
Do not retaliate
15 U.S.C. 1674(a) bars an employer from discharging an employee because his earnings have been subjected to garnishment for any one indebtedness. A willful violation can bring a fine of up to $1,000, imprisonment of up to one year, or both, under 15 U.S.C. 1674(b). IRM 5.11.5.2 refers employees threatened with termination to the Department of Labor’s Wage and Hour Division. See can an employer fire you over a levy.
Questions
Call the IRS contact on the levy. Do not rely on the employee’s description of what the IRS agreed to. You need it in writing from the IRS.
Pay what the levy says, on payday, until the IRS says stop in writing. That is the whole job, and the law protects you for doing it.