FPLP Levy on Federal Salary: The 15% Automatic Levy on Federal Employees

For a federal civilian employee, an IRS levy does not always arrive as a paper notice to your HR office. Often it comes through Treasury's automated systems: the Federal Payment Levy Program. One payday, 15% is gone. Here is how the program works for federal salaries and how to shut it off.

The authority

IRC 6331(h) allows the IRS to make a continuous levy on "specified payments," which includes federal payments other than means-tested ones. The levy attaches to up to 15% of each payment, "notwithstanding section 6334," meaning the usual wage exemption amounts do not apply. The rate is 100% for federal vendor and Medicare provider payments, but for salary it is 15%.

IRM 5.11.7 lists federal civilian employee salaries as subject to the FPLP, paid through the salary paying agencies: the USDA National Finance Center, the Interior Department's business center, the Postal Service, GSA and DFAS. It also states a limit worth knowing: "The FPLP does not include the military uniformed services members' salaries." Active duty pay is levied a different way. See levies on active duty pay.

How the 15% is computed

IRM 5.11.7 is specific. Federal employee salaries "will be levied for 15% of the gross wages or salary remaining after current taxes, health insurance premiums, retirement contributions, and, if applicable, court ordered child support payments are deducted. There should be no other deductions taken into consideration for the 15% calculation."

So voluntary TSP contributions, union dues, allotments and other deductions do not reduce the base. If your 15% looks wrong, compare it to that formula.

The notice before the levy

IRM 5.11.7 explains that if you have not already received a Collection Due Process notice on the tax periods, the system issues CP 90 (individuals) by certified mail before the FPLP levy. The levy is transmitted to the Bureau of the Fiscal Service at least ten weeks after the CDP notice if no hearing is requested. You also may receive CP 91 as a final reminder.

The CDP notice gives you 30 days to request a hearing under IRC 6330. A timely request suspends levy action on those periods while the hearing is pending and gets your case to the IRS Independent Office of Appeals. If you miss the deadline, an equivalent hearing may still be available, without the same Tax Court review.

The CP 90 is the warning shot. Ten weeks later, payroll starts sending 15%.

Checking the math on your Leave and Earnings Statement

Take a hypothetical biweekly gross salary of $3,000. Subtract federal and state income tax withholding, Social Security and Medicare, the FEHB premium and the mandatory FERS contribution. Suppose those total $900. The FPLP base is $2,100, and 15% of that is $315. A voluntary TSP contribution, a union dues deduction or a savings allotment would not reduce the base. If the amount withheld on your statement does not track that formula, raise it with the IRS and your payroll office. Mistakes happen, and a double levy is a real possibility.

FPLP versus a paper levy

The IRS can levy federal salary either way, but not both on the same payment. IRM 5.1.7.8.3.2 tells revenue officers not to serve a paper levy (Form 668-A or 668-W) on the federal agency, or set up a payroll deduction agreement, while the FPLP is levying the same payment, because the agency will not process it. The FPLP must be blocked or released first.

If both somehow hit the same paycheck, IRM 5.11.7.3.7 calls it a "double levy" and says proceeds from the improper levy may be returned and that levy released.

How to stop it

IRC 6343(a)(1) requires release when you enter an installment agreement, when the levy creates economic hardship, and in other situations. Practical paths:

• Installment agreement. Once approved and coded, the FPLP is released. See installment agreements.
• Hardship. If the 15% leaves you unable to pay basic living expenses, request CNC status. For FERDI taxpayers, IRM 5.1.7.8.3 says levies cannot be left in place if you meet CNC hardship criteria.
• Pay it. If the balance is small, paying in full ends it.

Timing: the two pay date problem

IRM 5.11.7 explains that FPLP releases post through Treasury processing cycles, with a cutoff before each payment. For monthly payments like annuities, the IRS can sometimes "rescind" a pending levy. But the manual notes that federal salaries are paid more often, with shortened or unknown cutoff dates, so "the systemic levy release will usually not be effective until after 2 cycled pay dates." Its example: an employee paid biweekly whose levy was released on May 13 still had the May 24 salary at risk.

Plan for that. If you are setting up a payment plan, ask the IRS to also return any levy proceeds taken after the agreement date.

Getting money back

IRM 5.11.7.3.7 says that when an FPLP levy is released because of economic hardship or because you entered an installment agreement, the levied payment may be returned, and "generally, it is in the Government's best interest to do so." For levy payments on or after March 23, 2017, you must request the return within two years of the levy payment. If you want the IRS to keep the money and apply it, say so.

The workplace side

An FPLP levy runs through your agency's payroll provider, so your agency's payroll office will see it. For most employees it stops there. If you hold a clearance or are in a position where the Standards of Ethical Conduct come up, read ethics rules and tax debt and security clearances and tax debt.

The FPLP is efficient. That cuts both ways. Once you have a real resolution in place, the same system releases the levy without anyone in your office having to do anything.