Payroll deduction vs levied wages

[Kimokeo]

When an employer receives a notice of levy, they garnish the pay of the employee.
There are consequences for failure to honor the levy.

When an employer receives a payroll deduction form from an employee, it is an agreement the employee has made with the IRS. The employer signs the form stating they agree to send money from the employee's paycheck.

If the employer doesn't want to do this anymore, is there an 'out'?
If the employee wants them to stop, can they?

[Bashful]

IRC 3402 states pretty clearly that "every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with tables or computational procedures prescribed by the Secretary". And the courts have ruled quite consistently that the word "shall" is a mandate, not an optional choice.

Short answer - no and no (legally).

[Kimokeo]

Your IRC section deals with withholding.

I'm not sure if I was clear. This involves a payroll deduction agreement.
As an employer, can the employer choose to stop honoring the agreement and make the employee make their own monthly payments and can an employee have their employer stop the deductions and take on the consequences that will follow?

I can't find in the IRC anything about payroll deductions.

[webhick]

You do know that there are people who have been heavily fined and/or are in jail for either not paying the "payroll deductions" either as employee or employer.

I don't think Kimokeo was talking about standard payroll deductions, like payroll taxes. It looks like an agreement between the employee and employer for the employer to remove a set amount from the paycheck and send it in on behalf of the employee for something like back taxes. And it's not an IRS garnishment.

I think.

[Kimokeo]

Webhick, that's my question.

Payroll deduction, in my question, relates to a monthly payment agreement - an installment agreement.

If you make monthly payments, you can choose to do so via a bank account withdrawal or through your payroll.

The question is, can the employer choose to stop doing this and dump it back on his employee to make the payments themselves and can an employee tell their employer to stop sending their money - they'll take care of it themselves?

I can't find in the IRC anything that punishes the employer for stopping in either scenario. I know there are consequences for ignoring a levy on their own employee.

[webhick]

I'm not sure if the IRS would cover this, since if you remove the concept of back taxes it's just a voluntary payroll deduction. I'm checking the department of labor. 50Q says that the site still sucks ass.

[webhick]

Oh, I should also point out that you may want to check with your state's Labor Board.

At mine, this would be applicable:

If an employer making a deduction of an employee's wages under paragraph I fails to make any payment relative to such deduction on the employee's behalf, and such employee loses any benefit or fails to meet an obligation caused by such failure, the employer shall be liable for such lost benefit or failed obligation. For any benefits provided to an employee paid for entirely by the employer without employee deductions, if the employer fails to make timely payments for such benefits and the employee loses any benefit or fails to meet any obligations caused by such failure, then the employer shall be liable for such lost benefits or failed obligations. The employer shall also be liable for any cost incurred by the employee caused by the employer's failure to make such payments.

I imagine that a voluntary deduction would be able to be terminated by either party, given a reasonable notice.

[Quixote]

There is no penalty if the employer stops making the payments. This is a moot point as no employer would ever stop making the payments, because the instructions to the form he signed when the agreement was set up told him not to stop until the IRS tells him to stop and employers are not going to do anything that might annoy the IRS.

Employers will often not stop even when required by law, for example, Title 11.

Payroll Deduction Installment Agreements. Payroll deduction installment agreements are voluntary. An employee under such an agreement can ask his employer to stop sending installment payments to the Service at the employee's discretion. However, Form 2159 instructs the employer to "continue to make payments unless the IRS notifies you that the liability has been satisfied." Consequently some employers mistake payroll deduction installment agreements for involuntary wage levies, and they refuse to halt payments to the Service at their employee's request. When this situation occurs and the taxpayer is in bankruptcy, the easiest solution is to send the employer a Form 668D, Release of Levy . This levy release may constitute a third party contact.

IRM 5.9.12.6.1 (03-01-2007) ¶9

[Kimokeo]

Quixote - thanks for the cite.