What is an IRS Wage Garnishment?
A wage garnishment is an extreme tactic used to collect taxes. It permits the IRS to seize money and property. The IRS can take your wages, money from your bank or financial accounts, attach your Social Security or Pension, and in some cases seize vehicles, real estate or personal property.
The IRS doesn’t need to go to court to garnish your wages. They issue a levy and contact your employer requiring them to send all but a portion of your wages to the IRS. A wage garnishment stays in place until your debt is paid, or until it is released using the appropriate remedies. Your employer is required to wait one pay period before implementing a garnishment.
IRS Wage Garnishment Process
Usually, the first communication will be a letter stating how much you owe. The amount owed will include penalties and interest. The letter will advise you of a date to pay the balance, or make other arrangements. If you are unable to pay, or if you fail to respond, the IRS will send additional notices with increasingly hostile threats. If you continue to ignore these notices, you will receive a “Notice of Intent to Levy” the last step before a wage garnishment. If you are assigned to a Revenue Officer they can come to your house or place of work.
How much of my wages can the IRS Garnish?
The IRS can take most of your money. The exact amount is calculated by determining what portion of your wage is exempt. For example; if you have $500 in exempt income and make $1000 a week, the IRS will take $500. If you make $2000 with $500 exempt, they will take $1500, and so on. This table from the IRS will tell you how much money you will be allowed to keep. https://www.irs.gov/pub/irs-pdf/p1494.pdf
How to Stop an IRS Wage Garnishment
Once a wage garnishment is in force dealing with the IRS can be difficult. The following is directly from the IRS website:
- If the IRS levies (seizes) your wages, that money is sent to the IRS each pay period until:
- You make other arrangements to pay your overdue taxes.
- The amount of overdue taxes you owe has been paid.
- The levy is released.
- Unless the IRS agrees to some resolution, there are only a few options that can force the IRS to stop your garnishment:
- Pay your tax debt in full.
- The statute of limitations expires.
- You file for bankruptcy protection (this may not erase your tax debt).
- You submit for an Offer in Compromise, or a payment plan.
- You show a “hardship” via financial documentation.
When does the statute of limitations expire for collecting back taxes?
The IRS has ten years to collect your delinquent taxes starting when the tax is assessed. Once the statute of limitations expires, for the most part, this is the end to your tax problems. It is important to note filing an offer in compromise, bankruptcy, innocent spouse request, or appeals will stop the running of the statute of limitations.
If you are thinking of waiting out the IRS, you might want to reconsider. The IRS becomes increasingly more aggressive the closer your debt gets to its expiration date. You should consider a professional resolution group to contact the IRS and monitor the “status” of your debt.
Can you appeal an IRS garnishment?
You can “stay” a wage garnishment through the appeals process. You can file a Collection Due Process Appeal if your request is postmarked within 30 days of recieving the Notice of Intent to Levy and Notice of Your Right to a Hearing. You can represent yourself in a CDP hearing. This is rarely the path of least resistance and can actually worsen the problem.
You can appeal for two reasons: 1. Doubt as to liability (you don’t think you owe the amount they claim) or, 2. The levy/garnishment will create an “undue hardship” (you can’t pay your basic living expenses with the levy in place).
What are my options for tax relief?
Tax relief can take on many forms. You need a solution that settles your IRS debt once and for all. It is important to research your options if you are going to try this on your own. Remember, experience dealing with the IRS is invaluable. What you read on-line is only a start, and often times wrong.
You want the best possible outcome, and there can be many different outcomes. Be careful of companies who give you a quick remedy. It is common in the tax industry to over-promise just to get your business. Commissioned sales people with limited knowledge of IRS guidelines will tell you “what you want to hear.” What is delivered can be far different.
Here are some tips to help keep you safe:
- What are the credentials of the person doing your initial interview? A “Tax Consultant” = commissioned sales person.
- Never prepay, or pay a large deposit. A reputable tax resolution firm will work with you on a payment plan you can afford.
- Have them detail the work they will be doing on your behalf, in writing.
- Know the total cost.
- If something seems too good to be true, it probably is.
- Advising someone of a resolution to their tax problem requires education, experience and knowledge. At a minimum, you need to know a taxpayers assets, income, expenses, employment, age, dependents and more. If you are talking to someone who is not asking these questions you should be skeptical.
- Many firms outsource their work. Ask who you will be working on your case, and what are their credentials.
Reputable firms offer a money back return. Ask about it and see if it is posted on their website, and if they will put it in writing.
What are my possible outcomes?
With a reputable company you will resolve your tax problem and get a solution you can live with. And, you will no longer have to worry about picking up the mail, or a stranger coming to your door. That said, each taxpayer’s situation is different and needs to be tailored.
Here are a few common outcomes:
- Installment Agreement – An approved agreement allowing you to pay off your tax debt in installments while avoiding collections
- Offer in Compromise – Using this option you can settle with the IRS for less than you owe. Sometimes much less. How much less is based on your assets, income, and overall financial situation. It is a great tool.
- Uncollectable due to hardship – Proving to the IRS that you are unable to pay can place you in Currently Non-Collectible status. You can potentially stay in this status until the debt expires. Often this is a better option than Offer in Compormise.
- Partial Payment Plans – Taxpayers using this option provide financial information that is reviewed. If you can show you can only pay a certain amount, you can limit your IRS payment to that amount. Your payment could be $10 a month!
- Innocent Spouse Relief – The IRS can collect back taxes from both spouses if they filed a joint return, even if they have divorced. However, in some cases, a taxpayer is forgiven if they can show they were unaware of the actions of their spouse.