The Minnesota Department of Revenue can issue a continuous levy to a third party. A third party is required to send regular payments towards a debtor’s unpaid debt. 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, the levy is limited to up to 25 percent of each payment. However, the department may take 100 percent of rent payments.
Continuous levies can be issued against independent contractors who receive 1099 non-employee compensation rather than W-2 wages, as well as those who receive dividends, rents, royalties, trust distributions, contract payments or any other type of period payments. View the statute, Minnesota Statutes, section 270C.68
The department can hold the third party liable for the debtor’s unpaid debt and add a 25 percent penalty for failure to honor the levy if the levy is not responded to or cooperated with.
Funds and the Continuous Levy Disclosure Form must be submitted to the department within 10 days of receiving the notice. The form incudes:
- Total amount payable to the debtor.
- If the debtor is an individual, 25 percent of the payable amount.
- Amount of other levies, setoffs or adverse interest along with an explanation.
- Date and amount of payment to the department.
- Frequency of payments.
- Reason why no payment is owed to the debtor (if applicable).
- Name, phone and fax numbers of the person completing the form.
A Continuous Levy Notification and Exemption Claim Form are sent to debtors when a continuous levy is done. A levy may not be issued against a debtor if an Exemption Claim Form shows a valid exemption. The exemption applies only to wage levies and continuous levies issued for non-employee compensation.
The most common types of continuous levy exemptions are listed on the form; however it is not an exhausted list. For a complete list view the statute, M.S. 550.37.
The department is not allowed to issue a continuous levy if it is known that the debtor qualifies for exemption. If it is discovered that the debtor is exempt, the department must release the levy already issued.
Once a levy is issued, the debtor cannot enter into a payment agreement to stop the levy. Voluntary payments will be accepted to reduce the time it takes to pay the debt, but the levy will not be stopped. The levy could be reduced if the debtor demonstrates that the levy will cause a significant hardship.
If a new debt is added after the levy is issued, that debt is not included in the levy. Due process must be served on the new debt while the levy continues. When the current levy is paid in full, the department will send a levy notice to the debtor for the new debt.
The department will release a levy when:
- The debtor is exempt from a levy.
- The debt is paid in full.
- If there is an adverse interest or setoff that prevents a payment.
- The debtor files bankruptcy.