IRS Form 668-C is the Final Demand for Payment. The IRS serves it on a third party, such as an employer, bank, or client, who has already received a levy on a taxpayer’s property and refused to turn over the funds.1Internal Revenue Service. Internal Revenue Manual 5.11.2 – Serving Levies, Releasing Levies and Returning Property It is not the form that takes money from your paycheck. That form is 668-W, and the two are so often confused that the difference is worth pinning down before anything else.
What Form 668-C Does
Form 668-C is an enforcement escalation. Before it appears, the IRS has already served a levy, usually Form 668-A (a one-time levy on a bank account or business receivable) or Form 668-W (a continuous levy on wages). If the party holding the funds ignores that first notice or refuses to comply, the IRS follows up with 668-C: comply now, or face personal liability.1Internal Revenue Service. Internal Revenue Manual 5.11.2 – Serving Levies, Releasing Levies and Returning Property
The recipient has five days to respond before the IRS moves to enforce the levy in federal court under IRC 6332. A third party who still refuses without reasonable cause becomes personally liable for the value of the property they should have turned over, plus a penalty equal to 50% of that amount.2Office of the Law Revision Counsel. 26 USC 6332 – Surrender of Property Subject to Levy The 50% penalty is punitive; it does not reduce the underlying taxpayer’s debt.
Form 668-C can be served in person or by certified mail, though in-person service is limited to commercial locations. A federal tax lien does not need to be on file before the IRS uses it.
If You’re the Third Party Holding the Money
You have no discretion to decide the levy looks unfair. Once you have been served, withholding must begin and the funds must be remitted to the IRS with the taxpayer’s identifying information according to the instructions on the form. If the taxpayer is your employee and later leaves the job, you must notify the IRS promptly, because a wage levy does not automatically follow the employee to a new employer.
Refusing to surrender levied property exposes you personally to the full value of what you failed to turn over, up to the total tax debt, plus interest at the underpayment rate running from the date of the levy, plus that 50% penalty if the refusal lacks reasonable cause.2Office of the Law Revision Counsel. 26 USC 6332 – Surrender of Property Subject to Levy
The Form Most People Actually Mean: 668-W
If money is coming out of your paycheck, the form your employer received is Form 668-W, Notice of Levy on Wages, Salary, and Other Income, not 668-C.3Internal Revenue Service. What if I Get a Levy Against One of My Employees, Vendors, Customers or Other Third Parties A wage levy under 668-W is continuous. It attaches to every paycheck from the day your employer receives the notice until the IRS formally releases it.4Office of the Law Revision Counsel. 26 USC 6331 – Levy and Distraint That is different from a bank levy under 668-A, which only captures what is in the account on the day the bank receives the notice.
Before the IRS can levy your wages at all, three things must have happened: the tax was assessed, you received a notice and demand for payment, and you received a final notice of intent to levy at least 30 days before the levy began. That final notice is typically Letter LT11 or L-1058, and it can be hand-delivered, left at your home or business, or sent by certified mail to your last known address.5U.S. Government Publishing Office. 26 USC 6331(d) – Requirement of Notice Before Levy It also tells you about your right to a Collection Due Process hearing, which you request using Form 12153 within 30 days of receipt.6Internal Revenue Service. Collection Due Process (CDP) FAQs
Protect the Exempt Portion of Your Paycheck
The IRS cannot take everything you earn. Part of each check is exempt from levy to cover basic living costs, and the exempt amount depends on your filing status and number of dependents. The figures are published each year in Publication 1494, broken out by pay frequency.7Internal Revenue Service. Publication 1494 – Tables for Figuring Amount Exempt from Levy on Wages, Salary, and Other Income
When your employer receives Form 668-W, they hand you a Statement of Dependents and Filing Status. You have three days to fill it out and return it.8Internal Revenue Service. Information About Wage Levies This is the single most costly step to miss. If you do not return the statement in time, your employer must calculate your exempt amount as if you were married filing separately with zero dependents, which is almost always a smaller exemption than you actually qualify for.9Internal Revenue Service. Internal Revenue Manual 5.11.5 – Levy on Wages, Salary, and Other Income You can submit it late and future paychecks will be adjusted, but you will not recover what has already been over-withheld.
The exempt amount is applied against your take-home pay after mandatory deductions such as federal and state income taxes, Social Security, Medicare, and unemployment taxes. Voluntary deductions like 401(k) contributions or health insurance premiums are generally not subtracted before the levy is applied. Use the Publication 1494 tables for the year the levy is in effect.
How to Get a Wage Levy Released
Once a levy is running, IRC 6343 requires the IRS to release it under specific conditions.10Office of the Law Revision Counsel. 26 USC 6343 – Authority to Release Levy and Return Property The realistic paths:
Pay the Balance in Full
The fastest resolution. Once the IRS receives the full tax, penalties, and interest, it must release the levy and notify your employer.
Set Up an Installment Agreement
If you cannot pay everything at once, an installment agreement spreads the debt across monthly payments. Taxpayers who owe less than $50,000 in combined tax, penalties, and interest can set up a long-term plan of up to 72 months.11Internal Revenue Service. IRS Payment Plan Options The IRS is generally required to release the levy once the agreement is in place, though it can keep the levy running if release would jeopardize the government’s position as a secured creditor.10Office of the Law Revision Counsel. 26 USC 6343 – Authority to Release Levy and Return Property
Submit an Offer in Compromise
An Offer in Compromise lets you settle for less than the full amount. The IRS considers offers on three grounds: doubt as to liability, doubt as to collectibility, or effective tax administration where full collection would be unfair.12Internal Revenue Service. Topic No. 204, Offers in Compromise The application requires a fee, waived for low-income individuals and for offers based on doubt as to liability, and you must stay current on filings and payments during the process. Acceptance releases the levy.
Claim Economic Hardship
If the levy is keeping you from covering basic needs like housing, food, utilities, or medical care, you can request release under IRC 6343(a)(1)(D).10Office of the Law Revision Counsel. 26 USC 6343 – Authority to Release Levy and Return Property You will need detailed financial documentation, typically Form 433-A, showing income, expenses, and assets.
Request Currently Not Collectible Status
If you genuinely cannot pay, the IRS may place your account in Currently Not Collectible status, which temporarily stops enforcement, including levies. The determination requires that you cannot pay reasonable basic living expenses after accounting for the levy.13Internal Revenue Service. Internal Revenue Manual 5.16.1 – Currently Not Collectible The debt is not erased. The IRS reviews these accounts periodically and resumes collection if your finances improve.
Appeal Through CDP or CAP
If you filed Form 12153 within 30 days of the final notice, the Collection Due Process hearing can stop or modify the levy, and its outcome can be reviewed by the Tax Court.6Internal Revenue Service. Collection Due Process (CDP) FAQs If that 30-day window closed, you can still use the Collection Appeals Program, which is faster and less formal but does not carry Tax Court rights.
When Normal Channels Aren’t Working
If you have hit a wall with the IRS and the levy is still running, the Taxpayer Advocate Service is an independent organization within the IRS that can step in. TAS helps when a tax problem is causing financial difficulty, when the IRS has not responded, or when a process is not working the way it should.14Taxpayer Advocate Service. Levies The service is free. The number is 1-877-777-4778.