IRS Changes Policy After Walorski Raises Concerns Over Impact on Military Retirees

Tuesday, January 16, 2018

IRS Changes Policy After Walorski Raises Concerns Over Impact on Military Retirees

In Response to Walorski Letter, Tax Agency Reverses Decision that Threatened Pensions of Low-Income Military Retirees

WASHINGTON – U.S. Rep. Jackie Walorski (R-Ind.) today applauded the reversal of an Internal Revenue Service (IRS) policy that could harm low-income military retirees after she raised concerns over its potential impact.

“All Americans have an obligation to pay the taxes they owe, but those who risked their lives for our country should be treated fairly and equally by the IRS,” Congresswoman Walorski said. “I am pleased the IRS has decided to protect low-income military retirees – many of whom spent decades serving in uniform – from unnecessary economic hardship.”

BACKGROUND

The Federal Payment Levy Program (FPLP) is an automated system that allows the IRS to levy up to 15 percent of certain federal payments to taxpayers with unpaid tax liabilities. Generally, taxpayers with incomes below 250 percent of the federal poverty level are excluded from automated levies. However, last year the IRS expanded the FPLP to include military retirement payments but decided not to apply the low-income filter to military retirees.

Congresswoman Walorski in November sent a letter to IRS Acting Commissioner David Kautter questioning the decision not to use the low-income filter for military retirees and raising concerns over its potential impact on these veterans. In a letter dated January 12, 2018, the IRS informed Walorski it will reverse its decision and move to apply the low-income filter to all military retiree payments.

A copy of Walorski’s letter is available here, and the text is below. The response from the IRS is available here.

November 17, 2017

The Honorable David Kautter
Acting Commissioner
Internal Revenue Service
1111 Constitution Ave., NW
Washington, DC 20224

Dear Acting Commissioner Kautter,

I am writing today regarding the recent Internal Revenue Service (IRS) decision to add military retirement payments to the Federal Payment Levy Program (FPLP) without also utilizing the Low-Income Filter (LIF). I believe this could unnecessarily hurt low-income military retirees who risked their lives for our country.

As you know, the FPLP is an automated system that allows the IRS to check its records for taxpayers with unpaid tax liabilities who receive certain payments from the federal government and to levy up to 15% of those payments. In order to prevent low-income taxpayers from suddenly being unable to buy food or pay for housing, the IRS generally applies the LIF to screen out taxpayers below 250% of the federal poverty level. The LIF applies to Social Security and Railroad Retirement Board benefit payments, for instance.

In May 2017, the IRS added military retirement payments from the Defense Financing and Accounting Service to the FPLP, while exempting military disability payments or payments to Medal of Honor recipients. However, according to the Taxpayer Advocate, the IRS is not applying the LIF to military retirement payments, despite a report from the Treasury Inspector General for Tax Administration indicating that the IRS would do so.

All Americans, including those who have bravely served in our military, have an obligation to pay their taxes owed, but those with unpaid tax liabilities should be treated fairly and equally by the IRS. While I support the agency’s efforts to collect unpaid tax debts, I am very concerned that the IRS’ decision not to implement the LIF for these payments will potentially cause unnecessary and significant harm for low-income military retirees.

In an effort to better understand this matter, I ask that you provide a written response by December 1, 2017 explaining the rationale for why the IRS has chosen not to apply the LIF to military retiree payments. If you have any questions, please contact Mike Dankler in my office. Thank you for your attention to this matter.

Sincerely,

JACKIE WALORSKI
Member of Congress

Walorski represents the 2nd Congressional District of Indiana, serving as a member of the House Ways and Means Committee.

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