The IRS has the power to garnish or legally seize any income you make to satisfy federal tax debt or taxes owed. Garnishments can apply to your hourly wages, salary, commissions, and bonuses. The IRS will contact your employer directly and require them to directly send the IRS a portion of your income. Your employer is required by law to comply with the IRS garnishment, typically within one full pay period of receiving the notice from the IRS. The difference between the IRS and most creditors, however, is that the IRS does not need to take you to court to get a judgment in order to garnish your wages, and the IRS can garnish more of your wages than a regular creditor can garnish.
The IRS Wage Garnishment Process
When the IRS seeks to garnish your wages for a tax debt that you owe, or use any other legal means to enforce payment of the taxes that you owe, it will first send you a written notice that sets out the amounts that you owe, including the tax, penalties, and interest. This notice should also provide you with a due date by which you must pay the balances in full. Assuming that you do not pay the balance in full, you later will receive another notice, entitled “Final Notice of Intent to Levy,” Once thirty days have passed from the time you have received the final notice, and you still have failed to pay the balance due, the IRS can proceed with garnishing your income.
The Amount that the IRS Can Garnish From Your Wages
The law places limits on the amount that a regular creditor can garnish from your wages. However, these normal limits do not apply to the IRS. Rather, the tax code requires the IRS to leave you with a certain amount of income after garnishing your wages to pay your tax debt. The tax code contains a table that corresponds to the number of exemptions that you claim for tax purposes, and sets forth the amount that is necessary for you and your family to pay for basic living necessities. Unfortunately, a garnishment by the IRS can amount to 70% or more of your income.
Stopping IRS Wage Garnishment
There are a number of different ways in which you can resolve your problem with the IRS. In order to avoid or stop a wage garnishment, you must get back into good standing with the IRS, either by paying your balance in full or entering into a tax payment plan or some other type of resolution.
The IRS will stop a wage garnishment if you enter into an approved installment agreement to pay your tax debt in full over a series of monthly payment installments. As long as you can make the monthly payments and pay off the debt before the debt becomes uncollectible by the IRS, your installment agreement is likely to be accepted by the IRS.
In some cases, you may be able to settle your debt with the IRS for less than the total amount that you actually owe, based on your financial situation. This is a fairly selective program and you have financially qualify. However, if you are facing a wage garnishment, you may qualify for this type of relief, and your wage garnishment will stop while your case is being reviewed.
If you can prove to the IRS that a wage garnishment or other collection action would prevent you from meeting the basic needs of you and your family, then the IRS may temporarily cease its collections efforts for months and even years. In this case, you must show that collection of the debt would be unfair because your financial circumstances are so bad. The IRS will require financials.
If you change employers, your wage garnishment will not proceed, and it will take some time for the IRS to again track your new employer down and reissue a new wage garnishment. This is only a temporary solution, but it can give you a few months of relief.
Temporarily Quit Your Job
If your employer will allow you to temporarily quit your job for a period of time, and later return to work, then this tactic will slow down the IRS as well. It will take some time for the IRS to discover that you have returned to work at the same employer and reissue a new wage garnishment to that employer.
While you cannot always discharge tax debt in bankruptcy, and the IRS can still take collection actions against you once your bankruptcy is complete, filing bankruptcy will stop your wage garnishment while the bankruptcy proceedings are going on. This may not be the best solution, but it is an option to consider if you have other debts to deal with as well.
File a Tax Levy Appeal
If you disagree with the tax levy in any way, you can file an appeal, even if it has been more than 30 days since you received the notice of intent to levy.