IRS Levy on Active Duty Military Pay: How It Works and How to Stop It

An IRS wage levy on military pay feels personal. Your chain of command's finance office is the one sending your money to the IRS. Here is how the process works, what it can reach, and the specific rules that protect servicemembers.

Paper levy, not the automated program

Many federal payments are levied automatically through the Federal Payment Levy Program (FPLP). Active duty pay is different. IRM 5.11.7 states that while the Defense Finance and Accounting Service (DFAS) pays military salaries, "the FPLP does not include the military uniformed services members' salaries."

Instead, the IRS serves a paper Notice of Levy on Wages, Salary, and Other Income, Form 668-W. IRM 5.11.6.5 confirms that income of federal officers and employees, including military personnel, can be levied. IRC 6331(a) expressly authorizes levy on the salary or wages of any officer or employee of the United States by serving notice on the employer.

What a military levy reaches

IRM 5.11.6.5.1 lists what a levy on the income of active military personnel attaches to:

• Wages and salary.
• Payments for quarters and subsistence.
• Travel, clothing and uniform allowances.
• Personal money and overseas allowances.
• Reimbursement for shipment of household goods.
• Lump sum leave payments.
• Retirement income, including disability payments.
• Reenlistment bonuses, severance pay and mustering out pay.
• Savings deposits.

The manual cross-references the property exempt from levy, which matters. IRC 6334(a)(9) exempts a minimum amount of wages based on your standard deduction and dependents, calculated using IRS Publication 1494, which the IRS updates each year. IRC 6334(a)(8) protects amounts needed to comply with a pre-existing court order for child support. And IRC 6334(a)(10) exempts certain service-connected disability payments under title 38, which covers VA disability compensation. See VA disability benefits and IRS levies.

A wage levy is continuous under IRC 6331(e). It stays in effect until released.

Rules that protect servicemembers

Combat zone: no levy

IRM 5.11.6.5.1 says that if a taxpayer is in a combat zone, no levy action is to be taken, including issuing Letter 1058, the final notice of intent to levy. See the combat zone freeze.

SCRA deferment: no levy

The same IRM section says no levy action is taken if the taxpayer has been granted a military deferment under the SCRA. See SCRA tax deferral.

A longer waiting period overseas

IRC 6331(d) requires a written notice of intent to levy at least 30 days before levy. IRM 5.1.7.11 goes further for military personnel: balance due accounts on military personnel stationed outside the area where the case is located require a waiting period of 40 days after the notice of intent to levy before the IRS issues a levy. The same section says APO and FPO addresses are treated as domestic for certified mail.

Collection Due Process

The final notice of intent to levy gives you the right to a Collection Due Process hearing if you request it within the 30-day period stated in the notice (IRC 6330). A timely CDP request generally stops the levy while the hearing is pending and puts your case in front of the IRS Independent Office of Appeals.

PCS moves do not shake a levy

IRM 5.1.7.11 explains that the Department of Defense instructs payroll officers to transfer a Notice of Levy to the proper payroll office when a member changes duty station anywhere in the world. The levy follows you.

National Guard and Reserve pay

IRM 5.1.7.8.3.2 says a Form 668-W has a continuing effect on the salary of National Guard members and reservists, and that DFAS must not return these levies without remittance when the taxpayer is an active member of the Guard or Reserve, unless the levy exemptions equal or exceed the pay.

How to get the levy released

IRC 6343(a)(1) requires the IRS to release a levy when, among other things:

• The liability is satisfied or becomes unenforceable by lapse of time.
• You enter an installment agreement, unless the agreement provides otherwise.
• The IRS determines the levy is creating an economic hardship due to your financial condition.
• Release will facilitate collection.

IRC 6343(e) adds that when the IRS agrees a balance is not collectible, it must release a wage levy as soon as practicable.

In practice, the fastest path is usually to file any missing returns, provide a financial statement, and propose a resolution: an installment agreement (often by payroll deduction or direct debit), hardship status, or an offer in compromise. See installment agreements for military and federal employees and Currently Not Collectible status.

A levy is the IRS's way of getting your attention. Once you engage with a real proposal, it usually has no reason to stay.

What to send with a release request

• A copy of the levy notice and your most recent Leave and Earnings Statement.
• Any missing tax returns, or a plan and date for filing them.
• A collection information statement (Form 433-F or Form 433-A) showing income, allowable expenses and assets.
• Your proposal: the monthly payment you can make, or the reason you cannot pay anything right now.
• If you are in a combat zone or have an SCRA deferment request pending, proof of that status.

The more complete the package, the faster the release. A call with nothing in hand usually just produces a deadline to send these same documents.

If money was taken after you resolved it

IRM 5.11.6.5.1 notes that if you pay the balance before levy proceeds arrive and the release does not stop the payment in time, the IRS credits the money and the overpayment generates a refund, and it can request a manual refund in a hardship case. IRC 6343(d) also allows return of levied property if the levy was premature, if you entered an installment agreement, or if return would facilitate collection.

Family allotments

One more detail. IRM 5.11.6.5.2 notes that Class Q allotments for dependents can be levied to collect tax owed by the dependent. If a spouse owes the IRS separately, the allotment you send home may not be safe.

Levies on military pay follow rules. Learn them, use the protections that apply, and put a real resolution on the table.