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Texas Payroll/Personnel Resource

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Mandatory Deductions
Tax Levies

State agencies and institutions of higher education may receive an Internal Revenue Service (IRS) notice to garnish the salary or wages of a state officer or employee who refuses or neglects to pay federal taxes. This notice is commonly known as a tax levy.

State agencies and institutions must comply with the levy notice by surrendering salary or wages that exceed the exempt amount. See Publication 1494 PDF to determine the exempt amount. The agency or institution must continue the levy until it receives a notification from the IRS to release the levy.

A state employee cannot request to have his or her wages levied voluntarily; the employing agency must be served a notice of levy from the IRS.

State agencies and institutions must treat an IRS levy as a payroll deduction. The IRS is a third-party payee. Before state agency payroll systems can generate payment for a third-party payee, a payee number must be created in the Texas Identification Number System (TINS). A payee number consists of the employee's Texas Identification Number and a new mail code with payment instructions for the IRS.

To learn more about this payroll deduction, see Chapter 9 “Deductions” of the USPS Process Guide or the SPRS Deduction Code Table.

Definitions

Levy
Legal term for a federal garnishment.
Mail code
The three-digit number often suffixed to a TIN that represents different mailing addresses or direct deposit instructions for payments issued to the payee.
Texas Identification Number
A number used in the Texas accounting system to uniquely identify a payee based on either a Employer Identification Number (EIN) or a Social Security number (SSN).

Sources

Internal Revenue Code, Sections 6331(a), 6332(a), 6334(d); Treasury Regulations, Section 301.6331-1(a)(4)(ii); Texas Government Code Annotated, Section 659.002(d) (Vernon Supp. 2004); 34 Texas Administrative Code, Section 5.45 (1999).

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