Levy on a 1099

The taxpayer sold insurance on behalf of a life insurance company. So an interpretation of that commissions may be levied in the same manner as wages shouldn't set a precedent for those who receive miscellaneous compensation that's not for commissions. When a tradesman acts as an independent contractor, he bills his customer for material, wages of other laborers, and his own fee. How would the customer know?

Well, don't keep us in suspense: Was he?

LOL. Yes, he was there.

The decision has nothing to do with, and doesn't seek to set a precedent for, anything other than "compensation for services paid in the form of fees, commissions, bonuses, and similar items." If it looks, walks, and quacks like salary and wages...

You're missing something obvious that is specific to life insurance salesmen. By statute, there are many circumstances in which their commissions are treated as wages and not treated as self-employment income for Social Security tax purposes, so at least these taxes should be withheld. That's probably what makes life insurance commissions resemble wages for the purpose of the ruling and this ruling probably shouldn't apply to any other type of nonemployee compensation.

For the OP, maybe there is a question of employee versus contractor treatment. The fact that the service provides translators at a set hourly rate and the translator is not free to negotiate his rate makes me wonder. But that's not the question asked.

Part of the fee includes the taxpayer's self-employment taxes (a self- employed person's equivalent to the employer's portion) and travel expenses. The payer won't know what remains for fees. So how can the entire amount be treated as if it were wages for the purpose of applying the levy?

There's probably a better ruling out there.

The OP's original question was whether a wage levy extended to payments to an independent contractor. Several here provided opinions and statute interpretations that it does not. I provided personal observation, based on treasury reg and backed by case law, that the IRS will pursue levy collection of such payments. No one here has provided a ruling to the contrary. It's up to the OP to consider the information provided, to weigh theory against reality, and decide how to proceed. He can comply with the levy and risk upsetting his worker, or he can refuse to comply and risk legal action by the IRS. The dearth of case law on this subject may be attributable to the willingness of most payors to accept the IRS position regarding the levy, their concern that scrutiny of their business practice may raise employee/IC questions, or their reluctance to incur the trouble and costs of litigation.

I'm not recommending not complying with the levy, but your position that sending the entire fee to IRS as if it were wages avoids trouble and cost of litigation isn't reasonable either. If the taxpayer feels he is in the right and will get the money back sooner from his customer than IRS, he may sue for breach of contract.

The whole fee cannot be wages. Therefore, if levied, the whole fee should not be sent to IRS. The question is how much to send.

I never said the entire fee should be sent. Several posts mentioned amounts exempt from wage levy, specifically:

"(Internal Revenue Manual) 5.11.5.4 (06-17-2008)

Exempt Amount

1. Part of the individual taxpayer's wages, salary, (including fees, bonuses, commissions and similar items) and other income, as well as retirement and benefit income, is exempt from levy.

1. The weekly exempt amount is:

1. The total of the taxpayer's standard deduction and the amount deductible for exemptions on an income tax return for the year the levy is served.
2. Then, this total is divided by 52.

1. Income that is not paid weekly is prorated, so the same amount is exempt.

2. In addition, the amount the taxpayer needs to pay court ordered child support is exempt."

The levy source has no legal standing to negotiate the terms of the levy. His defense in a suit brought by his worker lies in IRC 6332(e).

All of which assumes in the fee paid, that a portion of the fee is known to be equivalent to wages. Even if the entire amount of wages aren't subject to levy, the entire amount of the fee isn't wages.

That's the whole point of being self employed: One pages wages to one's self. Just because IRS isn't treating the taxpayer as the employer for the purpose of the levy doesn't mean that the payer is free to do so. The payer isn't an employer paying wages.

IRS is in the wrong here but it's a traditional collection tactic: Annoy enough people in the target's life so that one of them will convince the target to send money merely to end the hassle.

What payer is going to fight IRS? But if he sends the entire amount to IRS, he's clearly in breach of contract.

I'd love to know what a lawyer well versed in contract law would recommend.