The IRS Is Misusing Its Levy Power—and Your Self-Employed Clients Are Paying the Price
The IRS says it’s a continuous levy.
But is it?
IRS levies are many times applied in the wrong way—and the wrong interpretation of a levy can wreak havoc on your client’s financial life.
Especially if your client is self-employed.
Let's talk about the source of confusion - when the IRS uses a wage garnishment form (Form 668-W) against someone who doesn’t receive wages.
It happens more often than you'd think.
Why This Matters
If you're working with clients who are self-employed—contractors, consultants, real estate agents, appraisers, or tradespeople—there’s a good chance one of them will face a tax levy.
If the levy is applied incorrectly—and treated as continuous—your client could be cut off from the very income they need to finish jobs and pay down the tax they owe.
The reality is, the IRS's internal guidance says levies probably shouldn't be continuous in these cases.
But that doesn't stop them from issuing it.
What We’ll Cover
Here are 4 key things to understand about IRS levies and how they affect self-employed clients:
The difference between Form 668-W and Form 668-A
How the IRS decides whether income is “Fixed and determinable”
Why self-employed income often shouldn't be continuously levied
What options exist when a contractor gets hit with the wrong kind of levy
1. Form 668-W vs. Form 668-A
Form 668-W is the form the IRS uses to garnish wages. It's a continuous levy—once it’s in place, it stays there until the tax debt is resolved or the IRS agrees to release it.
That makes sense for W-2 employees getting regular paychecks. But for independent contractors or 1099 workers?
It would put the taxpayer out of business. That’s where Form 668-A comes in. It’s a one-time levy used to grab money that’s currently owed to the taxpayer — like money sitting in a bank account or an invoice about to be paid.
The problem is that the IRS sometimes uses 668-W instead of 668-A for contractors.
2. “Fixed and Determinable” Income—The Legal Standard
According to IRS regulations, a continuous levy is only appropriate when the income is “fixed and determinable.”
In other words, is there a clearly defined amount that the taxpayer is entitled to receive on a set schedule? Employees get a regular paycheck—fixed and determinable.
But self-employed contractors? They usually invoice after work is completed. The amount isn’t final until the job is done. That income isn’t “fixed” or “determinable” until the dust settles.
3. Why It Matters for Your Clients
If your client is a building subcontractor who just fronted money for supplies and payroll—and then the IRS seizes the client’s payment as if it were a wage—it could put them out of business. They’re getting hit with a continuous levy when it should have been a one-time levy.
And third parties receiving the levy (customers or clients who owe money to your client) often don’t understand the rules either. They get scared. They don’t want to mess up. So they treat it like a continuous wage levy.
Suddenly, your self-employed client’s business grinds to a halt. They can’t finish jobs. They can’t pay their workers. And they can’t make money to resolve the tax debt.
4. How to Fix It
If a client is hit with the wrong kind of levy, there are ways to fight back.
First, you can ask the IRS collection manager to review the levy. Sometimes this gets resolved in a matter of days but if that doesn’t work, you can file a Collection Appeals Program (CAP) appeals hearing request using Form 9423.
This can take longer—but it’s a way to get the issue in front of someone who knows the rules and is independent from the IRS.
At worst, the Taxpayer Advocate Service can sometimes help push things along faster. And of course, your client can set up a payment plan or settlement offer with the IRS, which may trigger a levy release.
TL;DR: What You Need to Know
⏩ IRS uses Form 668-W for continuous wage levies
⏩ It should only apply to “fixed and determinable” income—usually W-2 wages
⏩ Many contractors don’t meet that standard, but the IRS uses 668-W anyway
⏩ Incorrect continuous levies can destroy cash flow for self-employed clients
⏩ There are appeal options, and a resolution agreement can release the levy.
Let's Talk...
➤ Have you ever had a client who was misclassified—or mistreated—by the IRS collections process?
➤ What happened, and how did you help them navigate it?
