A continuous levy requires that a third party send regular, periodic payments to the Minnesota Department of Revenue. When the debtor is a business, 100 percent of the funds owed to the debtor may be demanded from the third party. When the debtor is an individual, however, the levy is limited to 25 percent of each payment, which is similar to a wage levy. This gives the Commissioner of Revenue the power to issue a continuous levy against independent contractors—those who receive 1099 non-employee compensation rather than W-2 wages—and those who receive dividends, rents, royalties, trust distributions, contract payments or any other type of periodic payments. (Note: Rent payments are exempt from the 25 percent limitation; the Minnesota Department of Revenue may take 100 percent of periodic rents.)
If the payer does not respond to a levy or refuses to cooperate, the Minnesota Department of Revenue may hold the payer liable for the debtor’s unpaid debt and add a 25% penalty for failure to honor a levy.
The payer that receives a levy notice is required to deliver funds to the Department of Revenue within 10 days after each payment is due to the debtor. The payer must also complete and return a Continuous Levy Disclosure Form within 10 days after receipt of a notice. It includes:
The total amount payable to the debtor.
- 25 percent of the payable amount—if the debtor is an individual, not a business.
- The amount of other levies, setoffs or garnishments along with an explanation.
- The amount to be sent to the Minnesota Department of Revenue and the date.
- The frequency of payments (for example, weekly or biweekly).
- The reason why no payment is owed to the debtor.
- The name, phone and fax numbers of the person completing the form.
A Continuous Levy Notification and Exemption Claim Form is sent to debtors at the same time the continuous levy is done. When debtors submit exemption claim forms, the Minnesota Department of Revenue may not be able to issue levies against them. The exemption applies only to wage levies and continuous levies issued for non-employee compensation. While the most common types of continuous levy exemptions are listed on this form, it should not be considered an exhaustive list. Minn. Stat. §550.37 and the Tomczyk 295 B.R. 894 court case provide for more types of “relief based on need” than mentioned on the form.
The Minnesota Department of Revenue is not allowed to issue a continuous levy if we know that the debtor qualifies for exemption. Furthermore, we must release a levy that was already issued and refund any payments received if we discover after the levy was issued that the debtor is exempt.
Once the levy begins, it is too late to accept a debtor’s request to make voluntary payments to stop the levy. However, if the debtor demonstrates that the levy will cause significant financial hardship, the Minnesota Department of Revenue will consider a levy reduction. Any collector with authority to issue a continuous levy also has authority to reduce the levy amount.
After a levy begins, if the debtor has a new debt, the Minnesota Department of Revenue must serve due process for the new debt while the levy continues. If the debtor does not pay the new debt in full, we send a new levy notice to the payer once the first levy is satisfied.
The department will release a wage levy when:
- The debtor is exempt from levy per Minn. Stat. §550.37 and the Tomczyk 295 B.R. 894 court case.
- The debt is paid in full.
- If there is an adverse interest or a set off that prevents a payment to the Minnesota Department of Revenue.
- The debtor files bankruptcy.
Adverse interests are other levies and/or garnishments against the debtor that reduce the amount that a wage levy can take. See priority of levies above for more information.