State and Federal Tax Liens

Comptroller of Maryland (COM) State Tax Wage Lien

A Lien is a claim used as security for a tax debt. The COM Compliance Program Unit conducts numerous audits to ensure that tax returns filed with the State of Maryland are in compliance with all Maryland income tax laws. Employees that receive a State Tax Lien on their wages are encouraged to contact COM as soon as possible to discuss available solutions / options.

When will my MD state tax lien payroll deduction begin?
Employee payroll deductions will immediately begin within the payroll that information is served on CPB. It is important that the employee read their document to ensure that they understand the impact to their takehome pay.

Amount owed
If the balance is not paid in full, COM will send an income tax notice to the employee. If they do not respond to the first notice, an assessment notice will be issued. It will indicate the assessment plus substantial penalties and interest charged on the tax owed. If an employee refuses to make payment arrangements or fail to honor payment arrangements, COM may enforce stricter collection measures (wage lien).

Wage liens are continuous
COM allows for continuous liens against wages and salaries. This means that a lien continuously attaches until the balance is paid in full.

Statute of Limitations
Generally COM has three (3) years to audit a tax return from the due date of the return or the date the return was filed [whichever is later]. However, there is no statute of limitations when there has been a change made to the federal return by the IRS and the taxpayer fails to notify COM within ninety (90) days of the final determination by the IRS. If COM is notified within the ninety (90) days, they have one (1) year to assess the deficiency.

(Payroll) Notice to Income Tax Wage Lien
Pursuant to Section 13-811 of the Tax-General Article and Section 15-601-1 of the Commercial Law Article, Annotated Code of Maryland allows CPB to enforce wage and salary liens against an employee’s pay. It also states the employee’s rights in terms of exempt portions of their wages and salaries. Employees are encouraged to read their assessment notices in its entirety to understand their rights. It will explain how the lien is calculated. Pursuant to Section 10-910 of the Tax-General Article, COM may also enforce tax protectors which indicate the number of exemptions that an employee cannot exceed. If an employee requests a higher exemption, it cannot be increased without written authorization from COM.

(Payroll) Notice to Income Tax Wage Lien ~ Fixed Agreement
Employees may contact COM to modify the terms of their wage lien. COM will indicate the withholding amount to be taken per week or the biweekly amount to be deducted until the debt has been satisfied. CPB does not negotiate any terms on behalf of the employee. It is solely the responsibility of the employee to follow up with the COM Compliance Program unit.

(IRS) Federal Tax Levy

A Tax Levy is a legal seizure of your property to satisfy a tax debt. The IRS generally uses Form 668–W(ICS) or 668-W(C)DO to levy an individual's wages, salary (including fees, bonuses, commissions, and similar items) or other income. CPB generally has at least one full pay period after receiving Form 668-W(ICS) or 668-W(C)DO before we are required to send any funds from an employee’s wages to the IRS. Employees who have a levy placed on their wages are encouraged to contact the IRS as soon as possible to discuss a possible release of levy and/or alternative resolutions.

When will my federal tax levy payroll deduction begin?
Employee payroll deductions will begin one (1) pay period after the employee is notified by the Central Payroll Bureau. NOTE - It is important that the employee complete & return their exempt paperwork within three (3) days. See Wage levy exempt amount for more details.

Amount owed
Levy forms include a "Total Amount Due." This amount is calculated through the date as shown on the form. Interest and any applicable penalties will continue to accrue after this date. To get an updated payoff balance, the employee who owes the tax liability will need to contact the IRS. This information cannot be released to the Central Payroll Bureau. A continuous wage levy may last for an extended period of time. When all the tax shown on the levy is paid in full, the IRS will issue a Form 668-D, Release of Levy/Release of Property from Levy. The IRS may also release a levy if the taxpayer makes alternative other arrangements to pay their tax debt.

Wage levies are continuous
The Internal Revenue Code allows for continuous levies with respect to wages and salaries. This means that a levy continuously attaches until it is released.

Wage levy exempt amount
In the case of a levy on wages, the Central Payroll Bureau will only pay the employee wage amounts exempt from the levy. The IRS calculates the exempt amount based on the standard deduction and the number of personal exemptions the employee is allowed.

IRS Publication 1494 (pdf), which is mailed with Form 668-W(ICS) or 668-W(C)DO, explains to the Central Payroll Bureau how to compute the amount exempt from levy. A levy includes a Statement of Exemptions and Filing Status. The Central Payroll Bureau provides this statement of Exemptions and Filing Status to the employee to complete and return within three (3) days. If the Central Payroll Bureau does not receive the statement from the employee within three (3) days, the exempt amount is figured as if the person is married filing separately with one (1) exemption. The IRS will notify CPB when the taxpayer is not entitled to levy exemptions. NOTE - If a wage levy continues from one calendar year to the next, the employee may submit a new Statement of Exemptions and Filing Status and ask CPB to re-compute the exempt amount.