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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Setup Special Circumstances
Hold Bypass Indicator for a Bankruptcy or IRS Tax Levy

Agencies often pay individuals and vendors who are either in active bankruptcy or subject to Internal Revenue Service (IRS) tax levies. Payments must be distributed promptly to the bankruptcy court or the IRS without being held, and TINS must be updated when the bankruptcy is discharged or the IRS levy has been lifted.

Set Up a Separate Mail Code

When a paying agency receives federal bankruptcy court orders or IRS tax levies against one of their payees, the paying agency must set up a separate mail code under the payee’s TIN payable to the court or IRS.

Setting the Indicator

When a payee has a debt to the state, payments could be held from all mail codes for that payee. The hold bypass indicator on the bankruptcy or IRS mail code allows agencies to prevent these payments from being held and applied as an unauthorized offset against state debt. The indicator also suppresses the Notice of State Payment(s) Held.

Agencies must submit a Payee Change Request form (74-157) (login required) PDF to Payment Services to request that the hold bypass indicator be set.

Deleting the Indicator

When the paying state agency is no longer required to make payments to a bankruptcy court or the payee’s IRS tax levy has been lifted, you must submit a Payee Change Request to have the mail code inactivated or the indicator deleted.

CAUTION: Indicator May Be Deleted by Other Actions

If you change the mail code’s payee name, address or phone number or if Payment Services processes a number change or merge, the system automatically deletes the indicator. If the bankruptcy or IRS tax levy still applies, you must submit a new Payee Change Request to re-establish the indicator.

Maintenance Required

To ensure that the indicator is set correctly:

Note: If the indicator is not set, the paying agency must take the following steps to release any held warrants payable to a bankruptcy court or to IRS:

If these steps are not followed in a timely manner, the held warrant(s) will be offset. The paying agency must then recover the funds directly from the hold source agency for that payee and reissue the payment to the IRS or bankruptcy court.

Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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