MEMORANDUM DECISION RE MOTION FOR DAMAGES FOR VIOLATION OF THE AUTOMATIC STAY

ARTHUR S. WEISSBRODT, Bankruptcy Judge.

Before the Court is the motion ("Motion") by debtor Byron Jha ("Debtor") for damages against the United States of America, Internal Revenue Service ("IRS"), for violation of the automatic stay. The IRS concedes that the IRS violated the automatic stay by sending nine Notice of Intent to Levy letters to Debtor post-petition. Debtor also seeks a determination that the IRS violated the automatic stay by not revising the amount of withholdings from Debtor's post-petition wages that were subject to a letter sent by the IRS pre-petition to Debtor's employer setting the amount of taxes to be withheld from Debtor's wages. The IRS opposes that aspect of the Motion as well as Debtor's damages.

The Court heard lengthy oral argument on the Motion and the matter was taken under submission upon the filing of supplemental pleadings by the IRS. Debtor is represented by Cathleen Cooper Moran, Esq. of Moran Law Group, Inc. Special Assistant United States Attorney Chong S. Hong, Esq. represents the IRS.

This Memorandum Decision constitutes the Court's findings of fact and conclusions of law, pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure.

I.

FACTS

Pre-petition, on or about August 3, 2007, Debtor provided a Form W-4 Employee's Withholding Allowance Certificate ("Withholding Request") to Debtor's employer requesting that Debtor's federal income tax withholding be based on single status with 5 withholding allowances.1

On April 17, 2008, the IRS sent a letter to Debtor ("Lock-in Letter")2 informing Debtor that the IRS was going to instruct Debtor's employer to disregard the Withholding Request and instead instruct Debtor's employer to withhold income tax from Debtor's wages based on a marital status of single and no withholding allowances. The Lock-in Letter was sent based on a Withholding Compliance Referral dated February 29, 2008. The Withholding Compliance Referral was based on the fact that Debtor had owed taxes for every year since 1999 and Debtor had not voluntarily changed Debtor's Form W-4.3 Specifically, for the tax years 2001-2007, Debtor underwithheld taxes as follows:

-----------------------------------------------------------------------------------
    Tax Year      Tax Per Return      Withholding Credit      Underwithholding
-----------------------------------------------------------------------------------
2001             $26,937               $15,540             $11,397
-----------------------------------------------------------------------------------
2002             $26,026                $7,876             $18,150
-----------------------------------------------------------------------------------
2003             $17,718                $2,637             $15,081
-----------------------------------------------------------------------------------
2004             $10,931                $7,211              $3,720
-----------------------------------------------------------------------------------
2005             $14,316                $9,825              $4,491
-----------------------------------------------------------------------------------
2006             $11,639                $6,898              $2,4954
-----------------------------------------------------------------------------------
2007             $15,233               $10,411              $4,822
-----------------------------------------------------------------------------------

Debtor's bankruptcy schedules filed on July 8, 2008 show Debtor owed the IRS an aggregate of $145,575.00 in secured, priority and unsecured taxes for the tax years 1999-2007.

The Lock-in Letter provided that if Debtor disagreed with the IRS' determination of the withholding allowance, Debtor was to call the IRS at a telephone number provided in the Lock-in Letter and explain to the IRS why Debtor would be entitled to a different marital status and/or number of withholding allowances. Debtor could also contest the proposed withholding allowances in writing. If the IRS did not hear from Debtor within 30 days from the date of the Lock-in Letter, Debtor's employer was instructed to withhold taxes at the status and allowance provided by the Lock-in Letter. The Lock-in Letter provided that if Debtor believed at a later time that Debtor was entitled to claim a different marital status and/or more withholding allowances than the IRS determined, Debtor could complete a new Form W-4 as well as a written statement to support the claims made on the new Form W-4 and submit both documents to the IRS at an address provided in the Lock-in Letter. The Lock-in Letter withholding allowances took effect sometime after the pay date of May 23, 2008.5 The Lock-in Letter increased the amount withheld by $148.97 per two-week pay period.6

On June 23, 2008, Debtor filed a voluntary petition under Chapter 13 of the Bankruptcy Code. According to Debtor's schedules filed on July 8, 2008, Debtor is a single father with two minor children.7 At the time Debtor filed Debtor's bankruptcy petition, Debtor earned $5,384.57 per month working as an operations manager,8 and his monthly expenses were $4,855.00.9 Debtor's only significant asset is a 2004 Dodge Caravan.10

Debtor scheduled secured debt on the 2004 Dodge Caravan and for income taxes owed to the IRS.11 Debtor scheduled priority taxes owed to the IRS in the amount of $18,500.00 on Schedule E. Debtor also scheduled $163,995.00 in unsecured claims on Schedule F, of which $126,500.00 was for income taxes owed to the IRS for the years 1999-2003, plus dischargeable penalties.

On June 24, 2008, Debtor's bankruptcy counsel, Ms. Moran, provided notice of the commencement of Debtor's bankruptcy case to the IRS Special Procedures office in San Jose.12 On July 4, 2008, the Bankruptcy Noticing Center sent a Notice of Chapter 13 Bankruptcy Case, Meeting of Creditors and Deadlines to the IRS.

On July 3, 2008, Ms. Moran left a substantive message for IRS attorney James Whitten.13 On July 16, 2008, Ms. Moran called Mr. Whitten who referred Ms. Moran to IRS attorney Chong Hong.14 On July 16, 2008, Ms. Moran called Mr. Hong and faxed to Mr. Hong a copy of the Lock-in Letter.15

Also on or about July 16, 2008, Debtor received in the mail nine separate Notices of Intent to Levy issued by the IRS relating to Debtor's delinquent taxes for the tax years 1999 through 2007.16 On July 17, 2008, Ms. Moran called Mr. Hong and left a substantive message regarding the nine Notices of Intent to Levy.17 The nine Notices of Intent to Levy caused Debtor increased stress such that Debtor took six vacation days from work and did not take Debtor's children on vacation as planned, representing $2,318.36 in earnings. Debtor spent an additional $20 on medication for stomach distress. On July 21, 2008, Ms. Moran received a telephone call from Mr. Hong confirming that the IRS would not pursue any levies or liens against Debtor.18

On July 23, 2008, the IRS filed its proof of claim against Debtor asserting a secured claim of $575.00; a priority claim of $16,904.79; and an unsecured claim of $124,588.85 for income taxes due for 1999-2007.

On August 6, 2008, Debtor filed an amended Chapter 13 plan to reduce the monthly plan payments from $525 per month to $300 per month for the first 12 months and provide for stepped-up plan payments thereafter because Debtor did not have sufficient income with the Lock-in Letter in place for Debtor to make the original proposed plan payments of $525. The attorneys fees associated with the amendment to Debtor's plan total $112.50.

Debtor filed this Motion on September 17, 2008 seeking damages for violation of the automatic stay for both the IRS sending the nine Notices of Intent to Levy sent post-petition as well as the IRS' failure to lift the Lock-in Letter post-petition.

The Lock-in Letter was in effect through December 2008.19

Debtor was entitled to a federal income tax refund of $5,131.00 for the 2008 tax year.20

II.

ANALYSIS

A party seeking damages for violation of the automatic stay must prove by a preponderance of the evidence that: (1) a bankruptcy petition was filed; (2) the debtor is an individual; (3) the creditor received notice of the petition; (4) the creditor's actions were in willful violation of the stay; and (5) the debtor suffered damages. In re Henry, 328 B.R. 664, 667 (Bankr.E.D.N.Y.2005) (citations omitted). The first three elements are met in this case. The IRS concedes that the IRS' issuance of the nine Notices of Intent to Levy post-petition violated the automatic stay. The issues before the Court are whether: (1) the IRS' failure to lift the Lock-in Letter post-petition was a willful violation of the automatic stay; and (2) what, if any, damages, Debtor suffered as a result of any willful violation of the automatic stay.

A. Lock-in Letter

Debtor asserts that the pre-petition Lock-in Letter impermissibly asserts control over property of Debtor's bankruptcy in violation of Bankruptcy Code § 362(a)(3), which provides:

11 U.S.C. § 362(a)(3). According to Debtor, Bankruptcy Code § 1306(a)(2) classifies post-petition earnings as property of the bankruptcy estate. Because the Lock-in Letter required Debtor's employer to turn over wages in excess of the taxes owed for the tax year to which the Lock-in Letter applied, as demonstrated by the fact that Debtor received a federal income tax refund of over $5,000 for the 2008 tax year, the compulsory overwithholding of Debtor's wages violated the automatic stay.

The IRS contends that lock-in letters sent pre-petition do not violate the automatic stay for three reasons. First, lock-in letters are not an attempt to collect pre-petition taxes. Instead, lock-in letters only target withholding for the current tax year. Because Debtor did not bifurcate Debtor's tax year, all taxes due in 2008 are post-petition taxes. See 26 U.S.C. § 1398(d). Second, monies withheld by an employer are not property of the bankruptcy estate and, rather, are held in trust for the IRS. Begier v. Internal Revenue Service, 496 U.S. 53, 110 S.Ct. 2258, 110 L.Ed.2d 46 (1990). Third, even if monies withheld by an employer are considered to be property of the bankruptcy estate, the issuance of a lock-in letter falls within the exercise of police and regulatory powers exception of Bankruptcy Code § 362(b)(4). Because the Court determines that the monies withheld by Debtor's employer pursuant to the Lock-in Letter were not property of the estate, the Court does not address the IRS' argument that leaving the Lock-in Letter in place falls within the exercise of police and regulatory powers exception of Bankruptcy Code § 362(b)(4).

1. Nature and Purpose of Lock-in Letters

As explained by the United States Tax Court:

Davis v. Commissioner, T.C. Memo.2008-238, 2008 WL 4703706, *4 (2008) (footnotes omitted).

The Court finds that the purpose of the Lock-in Letter was to insure Debtor's payment of taxes owed in 2008 by mandating Debtor's withholding allowance. The Lock-in Letter was issued solely because Debtor failed to provide for sufficient withholdings for at least seven years prior to the 2008 tax year. However, there is no evidence in the record that the Lock-in Letter attempted to collect taxes owed for any year prior to 2008.

The Lock-in Letter provided a 30-day opportunity for Debtor to provide information to the IRS and to seek an adjustment of the proposed withholding allowances. The Lock-in Letter also provided a mechanism for Debtor to seek adjustment to the withholding allowance after the initial 30-day period. Specifically, the Lock-in Letter provided in relevant part:

Lock-in Letter at pages 1-2.

Debtor's counsel, Ms. Moran, contacted the IRS on April 25, 2008 with respect to the Lock-in Letter. The IRS would not speak with Ms. Moran because the Tax Information Authorization Form, IRS Form 8821, signed by Debtor in March 2008 did not cover the current tax year, 2008. Ms. Moran concluded that by the time Ms. Moran obtained an updated IRS Form 8821 to include the 2008 tax year, Debtor would have filed Debtor's bankruptcy petition and the Lock-in Letter would be withdrawn upon the filing of Debtor's bankruptcy case. There is no evidence in the record that Debtor himself sought an adjustment to the proposed withholding allowances during the 30-day opportunity provided in the Lock-in Letter. There is also no evidence in the record that either Debtor or Debtor's counsel later completed a new Form W-4 and a written statement to support the claims made on the new Form W-4 and submitted those documents to the address in the Lock-in Letter.

2. Monies Withheld for Taxes Not Property of the Estate

Debtor and the IRS differ as to whether monies withheld from wages in excess of the amount necessary to insure that post-petition taxes are paid are property of the bankruptcy estate. Debtor contends that all of Debtor's wages—including the amount withheld for the payment of future taxes—belong to the Debtor and are property of the bankruptcy estate. The IRS asserts that under Begier, when funds are withheld from a debtor's wages, those funds are held in trust for the IRS and do not become property of the bankruptcy estate until the debtor has a right to a refund of overpaid taxes.

Debtor argues that the Begier case is inapposite because Begier involved an attempt by a chapter 7 trustee of an employer to recover as a preference monies that the employer debtor had paid pre-petition to the IRS on account of the debtor's withholding obligations for taxes withheld from the debtor's employees. The Supreme Court held that wage withholdings held by a debtor's employer are property of the IRS. According to Debtor, Begier never held that: (1) wage withholdings held on behalf of a debtor are property of the IRS; or (2) the IRS is entitled to direct an employer to increase the amounts withheld and thereby transform the debtor's money into the IRS' money. Debtor is correct that Begier did not involve the same situation as is now before this Court. However, this Court finds that wages withheld by an employer at the time wages are due to be paid to a debtor are held in trust for the IRS and become property of the bankruptcy estate only in the form of a claim to a refund to any overpayment of withheld funds.

Internal Revenue Code § 3402 provides that, with certain exceptions, every employer paying wages shall deduct and withhold from those wages a tax in the amount determined by tables or computational procedures proscribed by the Secretary of the Treasury. 26 U.S.C. § 3402(a)(1). Withholding occurs at the time the net wages are paid to the employee. Begier, 496 U.S. at 60-61, 110 S.Ct. 2258. The employer is not liable to any person— including the employee—for the amount withheld. 26 U.S.C. § 3403; Giles v. Volvo Trucks North America, 551 F.Supp.2d 359, 363 (M.D.Pa.2008) (employer had no liability to employee where employer withheld taxes from the employee's wages in compliance with an IRS lock-in letter).

Taxes withheld by employers to pay income taxes are held in trust for the United States. See 26 U.S.C. § 7501; see also Treas. Reg. § 31.3402(a)-1(f). The trust is created at the time the wages are paid to the employee. Begier, 496 U.S. at 60-62, 110 S.Ct. 2258. The trust created under § 7501 creates a trust in an abstract amount—the dollar figure of the amount withheld rather than in the actual dollars withheld. Begier, 496 U.S. at 62, 110 S.Ct. 2258. Thus, the § 7501 trust applies to all funds withheld, including any funds that may later be shown to be excess withholding.

At the point the trust arises, the United States owns the equitable interest in the funds. See Begier, 496 U.S. at 59, 110 S.Ct. 2258. Accordingly, the funds withheld from Debtor's wages pursuant to Internal Revenue Code § 3402(a)(1) remained in trust for the United States until Debtor filed Debtor's 2008 tax return showing that Debtor had an overpayment of taxes and was entitled to a refund. Accord In re Gould, 401 B.R. 415, 424-25 (9th Cir.BAP2009), aff'd, 603 F.3d 1100 (9th Cir.), cert, denied, ___ U.S. ___, 131 S.Ct. 577, 178 L.Ed.2d 415 (2010)(holding that a tax overpayment is different from a tax refund and a debtor is not entitled to a refund of a tax overpayment until the IRS under 26 U.S.C. § 6402(a) decides to apply an overpayment to an unpaid tax liability, if permissible under applicable law).

Moreover, there is no "compulsory overwithholding" as Debtor alleges. As noted above, Debtor had the ability after the Lock-in Letter took effect to complete a new Form W-4 as well as a written statement to support the claims made on the new Form W-4 and submit those documents to the address in the Lock-in Letter in an effort to obtain an adjustment of Debtor's withholding allowances. Debtor did not avail himself of this process. Debtor's failure to avail himself of the adjustments set forth in the Lock-in Letter does not mean that the IRS violated the automatic stay.

B. Post-petition Notices of Intent to Levy

The IRS concedes that the IRS' issuance of the nine Notices of Intent to Levy post-petition violated the automatic stay. The Court finds that the IRS' issuance of the nine Notices of Intent to levy post-petition constitutes a willful violation of the automatic stay.

C. Damages for the IRS' Violation of the Automatic Stay

A person injured by a violation of the automatic stay is entitled to actual damages reasonably incurred as a result of a stay violation. In re Stinson, 295 B.R. 109, 118 (9th Cir. BAP 2003), rev'd on other grounds, 128 Fed.Appx. 30 (9th Cir. 2005). Courts look at damages that are reasonably incurred. In re Roman, 283 B.R. 1, 11 (9th Cir. BAP 2002). There must be a causal relationship between the alleged stay violation and the injury. See In re Dawson, 390 F.3d 1139, 1150 (9th Cir.2004).

1. Debtor's Failure to Exhaust Administrative Remedies

The IRS argues that the current Internal Revenue Code § 7433, applicable to actions taken by the IRS after July 22, 1998 per Internal Revenue Code § 7433(i), requires the exhaustion of administrative remedies before a motion for damages can be brought in bankruptcy court. Internal Revenue Code § 7433(d) provides in relevant part:

26 U.S.C. § 7433(d). Internal Revenue Code § 7433(b) limits the maximum liability of the IRS and provides:

Internal Revenue Code § 7433(e) provides:

26 U.S.C. § 7433(e) (emphasis added). Internal Revenue Code section 7430 provides that a court cannot award a judgment for reasonable litigation costs "unless the court determines that the prevailing party has exhausted the administrative remedies available to such party within the Internal Revenue Service." 26 U.S.C. § 7430(b)(1). Treasury Regulation § 301.7433-2, which relates to civil causes of action for violation of Bankruptcy Code sections 362 or 524, provides:

Treas. Reg. § 301.7433-2.

According to the IRS, these provisions serve to divest this court of jurisdiction to hear a motion for damages for violation of the automatic stay before the debtor exhausts the debtor's administrative remedies. The IRS cites to several cases in support of this proposition. In In re Graycarr, Inc., 330 B.R. 741 (Bankr. W.D.Ark.2005), the IRS willfully violated the automatic stay by sending notices of levy. The chapter 7 trustee moved for damages for violation of the automatic stay. The bankruptcy court held:

Graycarr, 330 B.R. at 747. See also In re Cooper, 2011 WL 165830, *2 (Bankr. M.D.N.C. Jan. 19, 2011) (explicitly disagreeing with In re Graham, 2003 WL 21224773 (Bankr.E.D.Va. April 11, 2003)). The bankruptcy court in Graham held:

Graham, 2003 WL 21224773 at *2. Debtor argues that Internal Revenue Code § 7433(e) provides that a petition before a bankruptcy court is the exclusive remedy for damages for violation of the automatic stay, an argument along the lines of Graham. This argument is essentially that because Internal Revenue Code § 7433(e) itself does not contain any administrative exhaustion requirement, no such requirement exists.

The Court agrees with Debtor to the extent that Internal Revenue Code § 7433(e) permits the bankruptcy court to award actual damages for a violation of the automatic stay without requiring a debtor to exhaust the debtor's administrative remedies prior to seeking such actual damages. 26 U.S.C. § 7433(e)(2)(A). The Court does not reach the question of whether a debtor has to exhaust the debtor's administrative remedies in order to seek administrative and litigation cost damages under Internal Revenue Code § 7433(e)(2)(B) because no such application is before the Court.

2. Actual Damages

As noted above, the Court holds that Internal Revenue Code § 7433(e) permits the bankruptcy court to award actual damages for a violation of the automatic stay without requiring a debtor to exhaust the debtor's administrative remedies prior to seeking such actual damages. 26 U.S.C. § 7433(e)(2)(A). Treasury Regulation § 301.7433-2(b)(1) incorporates Treasury Regulation § 301.7433-1(b)(1), which provides in relevant part, "[a]ctual, direct economic damages are actual pecuniary damages sustained by the taxpayer as the proximate result of the reckless or intentional, or negligent, actions of an officer or an employee of the Internal Revenue Service." Treas. Reg. § 301.7433-1(b)(1). In this Motion, Debtor seeks actual damages of $2,318.36 in earnings and $20 for medication for stomach distress.

On or about July 16, 2008, Debtor received in the mail nine separate Notices of Intent to Levy issued by the IRS relating to Debtor's delinquent taxes for the tax years 1999 through 2007. According to Debtor, the nine Notices of Intent to Levy caused Debtor increased stress such that Debtor took six vacation days from work and did not take Debtor's children on vacation as planned, representing $2,318.36 in earnings. Debtor also spent an additional $20 on medication for stomach distress. On July 21, 2008, Ms. Moran received a telephone call from Mr. Hong confirming that the IRS would not pursue any levies or liens against Debtor.

Debtor seeks $2,318.36 in earnings because Debtor asserts that as a result of taking the six vacation days in July 2008 and not receiving any "vacation," Debtor used up Debtor's vacation days and would not have been able to take additional vacation unless such future vacation was taken as unpaid leave. The IRS disputes that Debtor suffered actual damages relating to the vacation pay on three grounds. First, the IRS asserts that Debtor took the vacation days as a result of Debtor's previous plans rather than as a direct result of receiving the Notices of Levy from the IRS. Second, based on Debtor's pay stubs for the periods ending May 17, 2008 and September 6, 2008, Debtor had vacation balances of 108.68 and 66.64 hours, respectively, so Debtor still could have taken vacation time with pay after July 2008. Finally, there is no evidence corroborating Debtor's testimony regarding the cancellation of Debtor's actual vacation plans as a result of the IRS' actions.

The Court can certainly understand that it may well have been extremely upsetting to Debtor to receive the Notices of Levy from the IRS in violation of the automatic stay before Debtor's planned vacation. The Court also accepts Debtor's testimony that these Notice of Levy ruined Debtor's plans to take a vacation with Debtor's children. However, Debtor has not proven damages by sufficient evidence of this alleged suffering.

There is no corroborating evidence of specific cancelled plans. There is no proof of any actual loss of pay. For example, Debtor did not return to work instead of taking the six planned vacation days. Rather, Debtor apparently took the same planned leave at home, rather than going on vacation with Debtor's children. The pay stubs for May 2008 and September 2008 do not support Debtor's request for actual damages for lost wages. Debtor's request for lost wages is based in large part on the fact that Debtor had no other vacation time that Debtor could take with pay. However, a comparison of Debtor's pay stubs for the periods ending May 17, 2008 and September 6, 2008 shows that Debtor used 42.04 hours of vacation time during that period, and still had 66.64 hours of vacation time which Debtor could use as of September 6, 2008. Thus, while Debtor took vacation time in July 2008 and allegedly did not choose to go on vacation as planned, it is not the case that Debtor was left without any vacation time. Under the circumstances, Debtor's request for actual damages in the amount of $2,318.36 for using vacation days is not supported and is denied.

Regarding the medication, Debtor stated that Debtor had to increase Debtor's medication for Debtor's upset stomach and spent $20 on such medication. The IRS asserts that because Debtor's pay stubs for the periods ending May 17, 2008 and September 6, 2008 show a reduction of sick leave by 6 hours, so Debtor may have been ill regularly and any illness suffered by Debtor may not have been related to the IRS' actions. However, the Court finds that the IRS's evidence of Debtor's regular illness does not contradict Debtor's testimony that Debtor spent $20 on medication for stomach distress based on the IRS' nine Notices of Levy. Accordingly, this Court awards Debtor $20 in actual damages.

3. Attorneys Fees

Debtor also seeks attorneys fees for the prosecution of Debtor's motion for violation of the automatic say in an amount not yet specified. Under Sternberg v. Johnston, 595 F.3d 937, 940 (9th Cir.), cert. denied, ___ U.S. ___, 131 S.Ct. 102, 178 L.Ed.2d 29 (2010), Debtor's attorneys fees for prosecuting this motion for violation of the automatic stay are not compensable as actual damages under Bankruptcy Code § 362(k), except to the extent Debtor incurred attorneys fees to have the nine Notices of Levy lifted. There is no evidence in the record as to what this amount would be because the parties agreed to wait in order to have Debtor's counsel submit evidence of Debtor's attorneys fees until the Court determined whether to allow attorneys fees as actual damages. Debtor may decide that it is not worth pursuing attorneys fees to redress only the Notices of Levy—which were in effect from July 16, 2008 until July 21, 2008.

IV.

CONCLUSION

For the reasons set forth in this Memorandum Decision, the Motion is denied with respect to the Lock-in Letter and granted with respect to the nine Notices of Intent to Levy sent by the IRS post-petition. The Court finds that this Court has the authority to grant actual damages for the IRS' violation of the automatic stay with respect to the nine Notices of Intent to Levy. The Court awards Debtor $20 in actual damages for on medication for stomach distress. Counsel for Debtor shall submit a proposed form of order after review by counsel for the IRS as to form.

BYRON K JHA

600 RAINBOW DR APT 229

MOUNTAIN VIEW CA 94041-2546546

Social Security Number: XXX-XX-XXXX

Employer: Taymor Industries USA Inc.

Employer Identification Number: 94-3097152

Generally, the amount your employer withholds for federal income tax must be based on your Form W-4, Employee's Withholding Allowance Certificate. However, whether you are entitled to claim a complete exemption from withholding or a certain number of withholding allowances is subject to review by the IRS.

We have determined that you are not entitled to claim a complete exemption from withholding or more than a specified number of withholding allowances.

WHAT INSTRUCTIONS DID WE GIVE YOUR EMPLOYER(S)?

We instructed your employer above and any additional employers named on the last page of this letter to disregard the marital status and/or withholding allowances (or claim to complete exemption from withholding) shown on your Form W-4 and withhold income tax from your wages based on the following status and allowances:

In addition, we have instructed your employer(s) not to honor your current Form W-4 or a new Form W-4 from you, unless the status and/or allowances you claim result in MORE income tax withholding than at the status and allowances shown above.

WHAT DOES THIS CHANGE MEAN?

This change in your marital status and/or withholding allowances will mean an increase in the amount of tax withheld from your wages.

WHAT CAN YOU DO IF YDU DISAGREE?

CAN YOUR EMPLOYER(S) CHANGE YOUR MARITAL STATUS AND/OR INCREASE YOUR WITHHOLDING ALLOWANCES?

Your employer(s) must disregard any new Form W-4 that you file which results in less income tax withholding until written notification is received from us. If the information you give us justifies a change to the status and/or allowances shown above, we will instruct your employer(s) to adjust your income tax withholding accordingly. However, if you give your employer(s) a new Form W-4 that will result in MORE income tax withholding than at the status and allowances shown above, your employer(s) must honor it.

CAN YOU BE ASSESSED A PENALTY?

If there is no reasonable basis to justify the marital status and/or withholding allowances you claimed (or claim to complete exemption from withholding) on your Form W-4, you may be subject to a $500 civil penalty under IRC 6682 for making a false statement about your withholding.

WHAT IF YOU HAVE MORE QUESTIONS?

If you have any questions, you may call the Withholding Compliance Unit, weekdays between the hours of 8:00 a.m. and 8:00 p.m. at 1-866-791-0289.

If you prefer, you may write to us at the address shown below:

You may also send us the information by fax instead of mail. Our fax number is 978-474-1326. Please include a cover sheet giving the following information:

Whenever you write, please include this letter and, in the spaces below, give us your telephone number with the hours we can reach you. Keep a copy of this letter for your records.