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A Sorry, But Instructive, Little Subterfuge


I was reminded last week of one of the shabbiest and most astonishing little subterfuges engaged in by the IRS in practicing its “income” tax scheme-- the 'Notice Of Levy On Wages, Salary, and Other Income' (Form 668-W).  An acquaintance came into my office to announce that he was quitting his long-held, private-sector job.  He had been presented with a copy of a 668-W by his company’s ‘Human Resource’ department, along with a letter indicating that the company intended to respond to the notice by violating its contractual obligations to him and diverting huge portions of what it owed him to a third party instead-- just because that third party asked them to.


Unwilling or unable to work for nothing (or for what little of his earnings would not be high-jacked under this protocol), this late-middle-aged gentleman felt compelled to give up his seniority and take his chances in an uncertain job-market.  He won’t work at all for awhile, and when he does, it will likely be for less money than he received before, but at least he will receive it all.



 My acquaintance had with him his copy of the 668-W.  On its face the form identifies him and the company whose collusion it is intended to secure, along with a listing of figures alleged to be legal tax liabilities, although there is nothing to suggest that these allegations amount to anything more than unilateral, and thus legally meaningless, assertions.  On the back is a full page of fine print, comprising excerpts of Internal Revenue Code sections purportedly relevant to the form’s mission and authority.


The first such section cited is section 6331, ‘Levy and Distraint’.  This is, appropriately, the section of the IRC representing the statutory authority under which any levy can be conducted.  However, the citation begins with paragraph (b) of 6331: ‘Seizure and Sale of Property’, rather than paragraph (a): ‘Authority of Secretary’.  In fact, 6331(a) is nowhere to be found on the form.  Thus, though conspicuously reviewing the dire powers capable of being invoked against its proper targets, the fine print purporting to instruct the notice’s recipients about the law carefully and deliberately omits the part where such proper targets are actually identified!  This is what 6331(a) says:

If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax (and further sum as shall be sufficient to cover the expenses of the levy) by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax. Levy may be made upon the accrued salary or wages of any officer, employee, or elected official, of the United States, the District of Columbia, or any agency or instrumentality of the United States or the District of Columbia, by serving a notice of levy on the employer (as defined in section 3401(d)) of such officer, employee, or elected official. If the Secretary makes a finding that the collection of such tax is in jeopardy, notice and demand for immediate payment of such tax may be made by the Secretary and, upon failure or refusal to pay such tax, collection thereof by levy shall be lawful without regard to the 10-day period provided in this section.  [Emphasis added]


I referred to this as shabby and astonishing.  Here’s the shabby part: Not only is this 'notice of levy' presented to third parties as though reflecting a perfected and enforceable claim-- despite lacking even the least gloss of judicial legitimacy; but it is based upon a statute which declares, in its very first clause, that levy-by-mere-notice applies exclusively to federal workers!  Don’t be misled by the “any person” phrase and imagine that it modifies the subsequent specification: When the compensation of federal workers is explicitly identified as reached by the statute in this fashion, and that of non-federal workers is as prominently left out, the rules of statutory construction say unambiguously that the latter is excluded.  (It doesn’t say, “In addition to the wages and salaries of everybody else, those of officers, employees and elected officials...”, does it?).  Certainly there is a process by which any person who has been properly found liable for a debt to the government can be levied against, but only government workers as specified in 6331(a) (and in 26 CFR 301.6331-1, which expands the class to a few other specific federally-connected workers) can be levied against by a mere 'notice of levy'.


Consequently, although the version of the 668-W given to a company requires turning over “...this taxpayer’s wages and salary that have been earned but not paid yet...”, in the case of a private-sector worker this command is meaningless.  This simple reality is only emphasized by the cheap and shabby ploy of leaving 6331(a) off the form.  The IRS wants it to be assumed that its 'notice of levy'-- has universal applicability, and therefore seeks to conceal the contrary truth.



Now for the astonishing part: Despite that first clause of 6331 being so conspicuously and damningly omitted as to make clear to even the most naive tool of the scheme’s ambitions that something isn’t kosher (even before reading its language and having that suspicion confirmed), companies like the one cooperating in the ruination of my acquaintance’s life play along without so much as a hesitation!  I suppose such companies nervously reassure themselves that if the IRS’s claim isn’t legitimate, the victim can always sue to get his money back, so it’s not THAT immoral just to do what the scary bureaucrats say-- even if it is clear that they’re pulling a fast one; and even though such companies HAVE to know, even if only vaguely, that what they are participating in has some serious due process problems.



The 668-W ploy doesn’t rely entirely on that ‘see no evil’ thing, of course.  Cooperation is ‘encouraged’ by inclusion on the back of the 668-W of selected excerpts of another section of law relating to levy-- 6332: Surrender of Property Subject To Levy.  Those excerpts warn that “anyone in possession of (or obligated with respect to) property or rights to property subject to levy upon which levy has been made” shall turn it over on demand of the Secretary or risk being targeted themselves for the amounts involved.  Of course, 6332 only applies to “property subject to levy” as identified-- and limited by-- the conveniently missing section 6331(a)...  Thus, this threat is just another facet of the 6331(a) ploy; but it is one with a particularly corrupting aspect.  The subtext of its inclusion is, “Even if YOU know or learn the truth and refuse to play along, what are the odds that people who owe YOU money are going to be as upstanding when we send a version of this same notice to them?”  Putting the blinders on, and leaving the fight for due process and the rule of law in the hands of the original target, is made to seem the wisest course.


The psycho-dynamic being exploited here is little different than what can be imagined to have been at work when a 1930’s European pointed out to a demanding Nazi where the local Jews lived.  The enabling accomplice must have clung to a pallid and hollow rationalization that someone in authority elsewhere would see to it that nothing improper resulted from his assistance-- encouraged to embrace such a delusion by the understanding that a failure to cooperate would result in a demand to see HIS papers. 



Well, perhaps I’m being too harsh.  After all, a target of the ‘Notice of Levy’ ploy-- such as the poor fellow in my office last week-- CAN sue...  If he’s really being wrongly treated, he can just take all that money he’s got left, hire a Philadelphia lawyer, and get some justice!  


Of course, the IRS could’ve hired a lawyer-- heck, they’ve got lawyers on staff!  If they’ve got a legitimate claim, and are acting on legitimate authority, they could’ve just gone to court in the first place and won an easy judgment.  Then they could have presented THAT to my acquaintance’s company, instead of using that sneaky, corrupting, virtually fraudulent ‘Form 668-W’.  Everything would have been straightforward.  No assumptions would be involved; no anxieties would have to be entertained or suppressed-- and my acquaintance would have been afforded a proper chance to dispute the lawfulness of the agency’s claim to the lion’s share of his earnings.


I wonder why they didn’t?



OK, All That Being Said...


I recognize that many companies are in a tight spot in dealing with a 668-W.  On the one hand, they have legal and ethical obligations to the worker who has delivered on his end of the bargain and to whom the money is owed.  On the other hand, they are presented with a faulty assertion of a superior claim to that money, but one backed by the rabid-junkyard-dog reputation of what is widely seen today as an essentially criminal enterprise-- the IRS.  The perspective of corporate managers is further complicated by their responsibilities to stockholders to be prudent custodians of a jointly-owned enterprise, and thus to pick its battles carefully.  Although I will remind those facing this dilemma of Khrushchev’s observation that capitalists, if they concern themselves with nothing but the interests of business, will sell their enemies the rope with which they will eventually be hung; and Ben Franklin's that if we don't hang together, we will surely hang separately; I will also acknowledge that someone’s got to keep the farm going, or when the troops return from the battlefield-- whether victorious or not-- everybody starves.


          Consequently, I offer the following example of what might be used by a company facing this conundrum to finesse the situation:




We are in receipt of your Form 668-W regarding one (worker’s name) (Company name) is committed as a matter of policy, and civic duty, to upholding the law, and it is our sincere desire to comply with all lawful obligations to which we are subject.  You suggest such an obligation in your form, but we are troubled by what appear to us to be several areas in which your presentations, the statutory authority under which they are made, and the facts regarding (worker’s name) do not seem to mesh well.


We have read the statutes under the authority of which you claim to be acting (represented at 26 USC 6331 and following), including the portions which you have omitted from the back of your form.  The statutes specifically and exclusively identify federal workers (meaning those working directly for the federal government and those working for federally-connected entities) as entities whose unpaid compensation can be attached by way of a 'Notice of Levy' (and then, of course, only when liability has been properly established): "6331(a)... Levy may be made upon the accrued salary or wages of any officer, employee, or elected official, of the United States, the District of Columbia, or any agency or instrumentality of the United States or the District of Columbia, by serving a notice of levy..." 


In light of the basic legal principle of "Inclusio unius est exclusio alterius", (The inclusion of one is the exclusion of another.  The certain designation of one person is an absolute exclusion of all others. ... This doctrine decrees that where law expressly describes [a] particular situation to which it shall apply, an irrefutable inference must be drawn that what is omitted or excluded was intended to be omitted or excluded, Black's Law Dictionary, 6th edition)-- and the fact that (worker's name) is not a federal worker (relevant to any payments owed by this company, at least)-- we are unable to perceive how the statutes apply in this case.  This understanding is reinforced by the (exclusive) specification in 26 CFR 301.6331-1 (the regulatory structure by which 26 USC 6331(a) is implemented) of three separate categories of workers to whom the relevant levy provisions apply.  The three categories consist of those identified in the statute as noted above, as well as: 

(ii) State and municipal employees. Salaries, wages, or other compensation of any officer, employee, or elected or appointed official of a State or Territory, or of any agency, instrumentality, or political subdivision thereof, are also subject to levy to enforce collection of any Federal tax.

(iii) Seamen. Notwithstanding the provisions of section 12 of the Seamen's Act of 1915 (46 U.S.C. 601), wages of seamen, apprentice seamen, or fishermen employed on fishing vessels are subject to levy.

We presume that 'State and municipal employees' and 'Seamen' refer to those of the federal States, municipalities and Territories (as defined in the relevant revenue statutes), and federally commissioned mariners, respectively; however, such details are moot.  The inclusion of these specifications unambiguously contradicts any suggestion that the authority of the levy power in regard to compensation can or should be presumed as extending beyond those entities specified, for were that actually the case, subparagraphs (ii) and (iii) cited above would be entirely superfluous and redundant.  If the compensation of literally any person actually can be, or lawfully is, reached by these levy provisions, then no further specification would be needed.  That these specifications are provided proves that this is not so.  Within the context of the statute, 'any person' clearly DOES NOT mean "each and every American", it means "any person that is among the groups specified".


Furthermore, even if we were inclined to entertain uncertainty in that regard, we are also mindful of the United States Supreme Court's instructions in American Banana Co. v. United Fruit Co., 213 U.S. 347 (1909) that,

"Words having universal scope, such as 'every contract in restraint of trade,' 'every person who shall monopolize,' etc., will be taken, as a matter of course, to mean only everyone subject to such legislation, not all that the legislator subsequently may be able to catch." ,

and in Gould v. Gould, 245 U.S. 151 (1917) that,

"In the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the government, and in favor of the citizen." 

As our obligation to (worker's name) is entirely unambiguous, we find it impossible to honor your directive without clarification.


Finally, we are aware of the fact that the indemnification language provided in 26 USC 6332(e) which you have presented to our attention is highly provisional.  That language,

"(e) Effect of honoring levy

Any person in possession of (or obligated with respect to) property or rights to property subject to levy upon which a levy has been made who, upon demand by the Secretary, surrenders such property or rights to property (or discharges such obligation) to the Secretary (or who pays a liability under subsection (d)(1)) shall be discharged from any obligation or liability to the delinquent taxpayer and any other person with respect to such property or rights to property arising from such surrender or payment.",

clearly offers indemnification only as to the surrender of property "subject to levy upon which a levy has been made", which is to say, property upon which a levy CAN be made, and upon which a levy HAS been made.  Thus, the indemnification only protects us if the property you are seeking IS "property [lawfully] subject to levy", AND if a levy has been lawfully made upon that property.  Not only does it appear self-evident that neither of these requirements have been satisfied in regard to your demand, but you have furnished no evidence of any kind to the contrary-- not even so little as a sworn declaration by someone in your organization willing to take personal responsibility for your representations as to these matters.


Such a sworn declaration, invoking the penalties of perjury against the signer, is the very least starting point at which we could begin contemplating that we might be under an actual legal obligation which overrides our known duty to (worker's name).  (Indeed, it seems to us that any presentment as to either of these issues which is anything less than the formal conclusion of an independent court, in consequence of a proper adversarial proceeding, self-evidently cannot be sufficient, but further consideration along that line is premature at this point.)


Therefore-- in order to ensure that no one is the victim of a misunderstanding; and to protect (company name) from the possibility of legal action against us for any of several possible criminal and civil offenses which would be attendant upon our diversion of money which is legally the property of another if done other than as strictly and unambiguously required by law-- we respectfully and in good faith ask that the following statement be executed by someone of sufficient authority in your agency and returned to us, whereupon we will give prompt consideration to your request:


(Company name), a private-sector, non-federally-connected (union-state of origin) enterprise, is required by law to pay over to the Internal Revenue Service-- upon its demand by way of 'Notice of Levy' and in the absence of any court order supporting that demand-- a portion of the money (company name) owes to (worker’s name) for work performed by (worker’s name) on (company name’s) behalf and under its direction per the terms of the agreement that exists between these two parties.  This is true even though the work for which this money is owed in no way involves any activities by, or any status of, (worker’s name) as an officer, employee, or elected official, of the United States, the District of Columbia, a State, Territory, or Possession, or any agency or instrumentality of one or more of the foregoing, or as an officer of a corporation [if necessary, add “a majority of the stock of which is owned by or on behalf of the United States, or the power to appoint or select a majority of the board of directors of which is exercisable by or on behalf of the United States”].  Furthermore, I am empowered to declare, and do hereby declare, that (company name) is fully indemnified against any and all possible civil or criminal liability-- to any party and under any jurisdiction-- for doing so, and do hereby promise to personally reimburse (company name) for any amount for which it should be held liable in connection with its compliance with this demand.


I declare under penalty of perjury that all of the foregoing is true to the best of my knowledge and belief.


_________________________________             _____/____/____

       (Signature of testifying officer)                      (Date executed)



              (printed name and title of testifying officer)


_________________________________             _____/____/____

              (Signature of witness)                              (Date executed)


_________________________________             _____/____/____

              (Signature of witness)                              (Date executed)




The reader will note the careful avoidance of any statutorily custom-defined legal terms, such as "wages", "employee", "employer", "trade or business", etc..  This care is critical to getting a meaningful answer.  Any effort by the IRS to reply with such terms relevantly substituted should be recognized as an attempt to dodge the question.


In the interest of perfecting the viability of the preceding letter and affidavit for actual use by companies dealing with this difficult situation, I will possibly be revisiting them for additions and improvements-- and I invite anyone who feels able to contribute to that process to send me their suggestions at phendrickson ‘at’ losthorizons.com.  I particularly invite the contributions or comments of company managers, who might best be able to identify relevant areas needing attention.


View a letter from a U.S. Congressman about the 668-W scam

(A clearer rendering of this letter, though unquestionably a mere re-creation of the original, can be seen here.)


Click here to see a similar, and more recent statement by another member of Congress


Learn About The Broader Limitations On The Levy Power


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