The Internal Revenue Service has the power to “garnish” or legally seize any income you make in order to collect tax debt you owe them. These garnishments can be made not just to salary and hourly wages, but also bonuses and commissions. In cases where you owe the IRS money, they will contact your employer directly and mandate them to send the IRS a portion of your income. And your employer is required under the law to comply with the IRS garnishment.
While other creditors also have the power to garnish income, the IRS doesn’t need to take you to court or get a judgment to garnish your wages. What’s more, the IRS can take a bigger percentage of your income than a regular creditor can. If you are facing such extreme actions from the IRS, contact an experienced IRS tax attorney to obtain more information about your options to resolve your tax debt.
Understanding the Process
When the IRS seeks to garnish your wages to collect taxes you owe or use other legal means to force you to pay your tax debt, it will first send you a written notice that sets out the amounts you owe, including taxes, penalties and interest. This notice will also have a due date by which you will be required to pay the balance taxes in full.
You will later get another notice titled “Final Notice of Intent to Levy.” Thirty days after you get this notice, if you still haven’t paid the balance that is due, the IRS can proceed with garnishing your income.
How Much Can the IRS Garnish?
Federal laws limits the amount that can be garnished from your wages as far as creditors such as banks and credit card companies are concerned. However, these types of limits don’t apply to the IRS. Tax laws require the IRS to leave you with certain amount of income after garnishing your wages to pay off your tax debt.
The tax code essentially contains a table that tells the IRS the amount of income that is necessary for you and your family to pay for basic living necessities. The IRS can technically garnish 70 percent or more of your income.
Other types of garnishments such as those involving credit card companies are much smaller (about 25 percent), but the regulations regarding tax debt and IRS garnishments are different.
The exact amount of earnings that are exempt from garnishment depends on the individual’s tax filing status (whether single, married, filing jointly) and the number of dependents listed on their tax return. The IRS uses a chart to determine this amount based on those factors and the employee’s pay periods.
For example, based on the chart, for a single person who has no exemptions and is paid weekly, $182.69 of each paycheck is exempt from garnishment. A married person who is filing jointly, has two dependents and is paid biweekly would have to be left with at least $730.77 per paycheck after garnishment. Those who are over the age of 65 or blind may get additional exemptions.
Employers who get an IRS Wage Garnishment notice have a legal obligation to withhold the employee’s wages and pay the amount over to the IRS. Refusing to do so could subject the employer to civil penalties and even criminal prosecution.
How Can You Stop IRS Wage Garnishment?
There are several ways in which you can stop an IRS wage garnishment. In order to that, you must pay your tax dent in full or enter into a tax payment plan or some other type of resolution. Here are a few options:
- Get into an installment agreement. The IRS will stop garnishing your wages if you enter into an approved agreement to pay off your tax debt in monthly installments. As long as you make the monthly payments on time and pay off the debt, you should be in good shape. However, if you fail to make the payments, the IRS could go back to aggressively trying to collect the debt.
- Make an Offer in Compromise. In some cases you may be able to settle your debt with the IRS for less than what you owe based on your current and future financial situation. This is a program for which you have to qualify. But, if you are facing a wage garnishment, you may qualify for this type of relief. Your wage garnishment will be put on hold as your case is being reviewed.
- Make a case for financial hardship. If you can provide evidence to the IRS that a wage garnishment or other collection action would prevent you from meeting your family’s basic needs, the IRS may then temporarily stop its collections efforts.
- You could switch employers. Your wage garnishment will not continue if you change employers because it could take some time for the IRS to track your new employer and reissue a new wage garnishment. While this may only provide temporary relief, it is nonetheless, relief.
- File for bankruptcy. In some cases, you may be able to discharge your debt in a bankruptcy. The IRS can still take collection actions against you once your bankruptcy is complete. However, filing bankruptcy will put a pause on your wage garnishment as the proceedings are ongoing. This is certainly an option to consider, especially if you have other debts in addition to your tax debt.
Our Attorneys Are To Help If You Need Us
If your wages are being garnished, contact your employer’s payroll administrator immediately and ask not have your pay deducted until you’ve had an opportunity to complete an exemption application. Contact the IRS and ask for a confirmation that all necessary tax returns have been filed. If returns are missing, complete them, file them and pay the balance that is due.
At the Pew Law Center PLLC, we will help review your financial situation and help determine how to best stop the IRS’s collection efforts. We can help guide you through what can be a complex and intimidating process. Call us at (480) 745-1770 to schedule your no-cost, no-obligation consultation.