You filed a 1099 for a vendor and the IRS levied them: Forms 668-W and 668-A for the payer

How your 1099 became a levy source

The Automated Collection System receives levy sources from IDRS "when a case is established on ACS, and at least every three weeks afterward if a new levy source is available" (IRM 5.19.4.3.5, Aug. 4, 2014). Sources from information returns are listed "interest, then wage, then other documents; each group is in descending dollar order," and are assigned a priority: manually added wage sources and other confirmed sources first, 1099-R retirement sources needing managerial approval, "All other IRMF sources" at priority 09 (IRM 5.19.4.3.5). A business that paid a contractor $40,000 on a 1099-NEC is high on the list for that contractor.

The consequence is that a levy on your payments to a vendor is almost always based on last year's 1099. If you stopped using the vendor, the levy still arrives because the search is of the most recent filed year; you answer it by stating that you hold nothing. If you still use the vendor, the IRS has correctly identified a stream of payments.

Which form you received, and why

The distinction matters because of how long each form reaches. "A levy has continuous properties only for salary and wages. It attaches future paychecks, until the levy is released. Wages and salary include fees, bonuses, and commissions. All other levies only attach property and rights to property that exist when the levy is served. Non-continuous levies reach the property or assets for which the taxpayer has a fixed, determinable right" (IRM 5.19.4.3.10, Feb. 18, 2015). The manual's own example is royalties: a levy "reaches royalties for sales of those books in the future" but "does not reach royalties for books that are written and published later." Form 668-W "was developed to use when individual taxpayers may be entitled to the exemption from levy," and the IRC 6334(a)(9) exemption "also extends to persons working for contract income except for government contractors" (IRM 5.19.4.3.10); the contractor fills in the statement of exemptions on the form and the payer applies the exempt amount from the IRS tables. Form 668-A "was developed to use when the taxpayer is a corporation, partnership, or other entity (no exemption applies) and for levies on property held by third parties" (IRM 5.19.4.3.10).

Two special cases. Payments under a federal contract are "subject to continuous levy under IRC 6331(h)" with no exemption, and "Form 668-W should not be used to levy on federal payments" (IRM 5.19.4.3.10 Note). And a merchant account reported on a 1099-K is levied on the acquiring bank or processor by Form 668-A; "The funds held by the processors and acquiring bank are not deposits within the meaning of IRC 6332(c) and the 21 day holding period does not apply," and a 1099-K with the Electronic Payment Facilitator box checked loads as "INFO ONLY" because an EPF "may not hold the taxpayer's property" (IRM 5.19.4.3.5.1, Aug. 4, 2014; 5.19.4.3.10 Note).

What the levy requires of you

The levy is served on you as the person holding the taxpayer's property, and IRC 6332 requires you to turn over what you hold or owe, up to the amount on the levy. Under a Form 668-A, you pay over amounts you owe the vendor on the date the levy is received (an unpaid invoice, a retainer, an accrued commission), and not amounts for work done later; under a Form 668-W, you keep paying over each payment until a release arrives, after the exempt amount if the vendor is an individual who returned the statement of exemptions. A bank "must wait 21 calendar days from the received date before sending payment" (IRM 5.19.4.3.10); that holding period is a bank rule, and the levy you received states its own response date. The IRS sends the taxpayer "Form 8519, Taxpayer's Copy of Notice of Levy, ... seven days after Form 668-A is sent" (IRM 5.19.4.3.10), so your vendor usually learns of the levy a week after you do.

Before any levy issued, the vendor received a Collection Due Process notice: ACS "uses an LT11 (Notice of Intent to Levy and Your Notice of a Right to a Hearing)," revenue officers use Letter 1058, and "The taxpayer MUST have been issued an LT11 or equivalent on or after 1/19/99 in order to levy," with "A minimum of thirty days" between the notice and the levy (IRM 5.19.4.3.1, July 10, 2023). Whether the vendor got that notice is the vendor's argument to make, not yours; the levy on its face is a demand you have to honor.

Honoring it is not a breach of your contract with the vendor. A person who pays the IRS under a levy is discharged from liability to the taxpayer for the amount paid (IRC 6332(e)); one who refuses can be liable for the amount plus a 50% penalty (IRC 6332(d)). Keep the levy, the computation of what you held, the exempt-amount statement if any, and proof of payment with the vendor's file.

When it ends

A Form 668-A ends when you pay over what you held on the date of service; nothing else is attached. A Form 668-W ends only on a release. The manual requires a release "on any modules where the levy was issued prior to the expiration of the taxpayer's 30-day notice period," where the LT11 went to the wrong address, where "the liability is no longer owed, or where a pending adjustment will fully satisfy the liability," and in the other listed conditions; "Continuous levies must be released timely after the account is full paid. If a levy is not released in a timely manner, employers will continue to send money creating the potential for collection of surplus proceeds" (IRM 5.19.4.4.10, Dec. 30, 2024; 5.19.4.3.10 Reminder). A vendor who has paid in full or entered an installment agreement should ask the IRS for a release; you keep remitting until Form 668-D, the release, reaches you. "Release of levy is not required for a levy that was issued prior to reaching resolution with the taxpayer unless it meets one of the criteria for required release" (IRM 5.19.4.4.10): a vendor who merely promises to cooperate does not get the levy lifted.

Four situations the ACS manual does not cover

The field collection manuals add rules a payer meets when the levy comes from a revenue officer rather than the Automated Collection System, or when the facts are not the simple case.

If you do not pay over. The officer first explains IRC 6332: that it "Requires the property to be surrendered," "Discharges the person from any liability to the taxpayer and anyone else," and "Describes the person's liability if the levy is not honored." If the payer "still refuses, serve Form 668-C, Final Demand for Payment," by certified mail or in person, and "Allow the third party 5 days to respond to Form 668-C ... before taking action to enforce IRC 6332" (IRM 5.11.2.2.9, Aug. 1, 2025). The 50% penalty under IRC 6332(d)(2) is pursued through the Department of Justice. A Form 668-C is the last warning before a suit.

If the money is not the vendor's. A levy reaches only "the taxpayer identified," and the officer is told to "Serve a levy only when there is reason to believe the third party is holding the taxpayer's property or owes a debt to the taxpayer" (IRM 5.11.2.2.1, Aug. 1, 2025). If the levy names a person but the amounts you hold belong to someone else, say a payment owed to a company the named person merely works for, the owner of the money has a wrongful levy claim under IRC 6343(b): for levies served on or after March 23, 2017, "within 2 years of the date of such levy," filed with the CEASO group manager for the area, with interest paid on money returned, and a CAP hearing available "before the levy proceeds are turned over to the IRS" (IRM 5.11.2.3.2.1, Aug. 1, 2025; Pub 4528). A bank may be asked to hold funds beyond the 21 days while ownership is sorted out. The claim belongs to the owner of the property, not to the payer, but the payer is the one who can flag the problem before paying over.

LLCs. For employment taxes on wages paid from 2009 a disregarded single-member LLC is a separate taxpayer. "A levy will attach only to the assets of the taxpayer identified." When the LLC is liable the levy "must reflect the name, trade name, if applicable, and EIN of the LLC, and not the name and identification number(s) of the SMO"; when the owner is liable the reverse (IRM 5.11.6.15, Jan. 22, 2010). A levy naming a sole owner personally does not reach your payments to their LLC, and a levy naming the LLC does not reach what you owe the owner. Match the name and TIN on the levy to the name and TIN on the vendor record, which is the same match the W-9 was for.

Receivables, billing services and merchant accounts. "A notice of levy reaches future payments, only if the taxpayer already has a right to them" (IRM 5.11.6.8, Mar. 15, 2005): an unpaid invoice for work done is reached, a contract for work not yet performed is not, which is why a 668-A on a vendor's open invoices is answered once. A billing service that collects payments for the vendor is levied; one that only sends bills is asked for records; a service that keeps a fee and remits the net pays the net (IRM 5.11.6.8.1, Jan. 22, 2010). For card processors, the obligation to the merchant "arises at the time of the sale," the funds "are not deposits within the meaning of IRC 6332(c) and the 21 day holding period does not apply," and the processor remits on its normal settlement cycle, excluding "receipts after the day the levy was served" (IRM 5.11.6.16.3, Sept. 26, 2014).

The appeal a payer can file: CAP before the money moves

A payer is rarely the taxpayer on a levy, but the Collection Appeals Program is open to "a third party whose property is subject to a collection action," and "Third parties claiming property was wrongfully levied are entitled to CAP before the levy proceeds are turned over to the IRS. Once the levy proceeds are turned over, the third party must submit an administrative claim to Advisory under the procedures described in Pub 4528" (IRM 5.1.9.4, Aug. 28, 2025). The request can be oral or on Form 9423, "There is no deadline for requesting a CAP appeal in most situations," and the first step is a conference with the group manager (IRM 5.1.9.4.2). The practical meaning for a payer that holds money belonging to someone other than the person named on the levy is to say so before remitting, in writing, and ask for the CAP conference; after remittance the owner's remedy is the two-year wrongful levy claim described above. CAP "cannot be used to determine a taxpayer's liability" (IRM 5.1.9.4.1), so it is not a way for a vendor to argue the balance through you; the vendor's own route is the Collection Due Process hearing on the LT11 or Letter 1058 that preceded the levy.

What you can tell the vendor

You can tell the vendor that you received a levy, which form it is, what you have paid over, and that only the IRS can release it. The number to call is on the levy. For an individual contractor, the statement of exemptions on Form 668-W is the one thing within the vendor's control that changes what you remit; it should come back to you quickly, because the exempt amount defaults to the lowest table if it does not. Beyond that, the vendor's routes are the vendor's: full payment, an installment agreement, a hardship claim, or a Collection Appeals Program request on the levy. None of them involve the payer.

What you should not do is agree to route payments through a different entity, pay the vendor's spouse or a new LLC, or hold payments back to avoid remitting. The manual deletes certain sources it considers low value or protected, but once a levy is served the payer's duty is fixed by the statute.

What this means for your vendor file

Two things follow for the people who file the 1099s. First, the IRS's levy sources are only as good as your payee data: a 1099 filed under a wrong TIN sits on the wrong person's levy list, and a 1099 under the right TIN but a stale address delays the Form 8519 copy. Correct TINs serve your vendors as well as the IRS. Second, the reporting thresholds are not the same as the levy thresholds; ACS ignores non-employee compensation under $500, so a $900 1099-NEC is a levy source and a $400 one, if you filed it, is not.

The vendor's side of the same event, a payee whose 1099 income has been reported and who now has an IRS balance, is covered on the TIN mismatch page and the payee CP2000 guide.

Questions people ask