IRS Wage Garnishment - How It Works, How To Prevent, How To Get Released

Wage Garnishment is a common way for the IRS to collect unpaid taxes. This forced recovery mechanism imposed by the State or Federal tax collectors can be a major nuisance for individuals. Wage garnishment doesn't take into consideration that some months you will need more money than others, it just takes what in can until all taxes are recovered. Understanding how this works and understanding other options available can help you prevent or get a tax wage garnishment lifted. There are also companies available that specialize in this type of situation and can work with you to get a more manageable outcome.

How IRS Wage Garnishment Works

Wage Garnishment is type of tax levy, and is one way in which the IRS (Internal Revenue Service) or State Tax Collection Agency attempts to recover back taxes or taxes you owe by garnishing your salary or wages. In other words, they will deduct a percentage of your paycheck each month for taxes and it can be a significant. The IRS or State Collection Agency can garnish your wages without a court order. Federal law states that a consumer can exempt up to 75% of disposable weekly earnings or 30 times the minimum wage which is currently $7.25 (whichever is greater). In other words, the government cannot take more than 25% of your weekly after-tax income or 30 times the minimum wage. State tax collectors can also garnish your wages. Each state has different laws with wage garnishment but typically wage garnishment can result in 25% of your net income being garnished. Normally the individual will receive an "Intent to Levy" CP Notice which is demanding payment for taxes and threatening the taxpayer that if unpaid or unresolved that a levy will follow.

If this notice is ignored a final notice is normally sent 30 days before the garnishment begins. Sometimes this is not the case, they can still garnish your wages even if you do not physically receive a notice, especially if you have moved and the IRS doesn't have the most current address. This garnishment will continue until the entire amount that is owed is paid back or there is another agreement that is made to pay these amounts back.

How to Prevent IRS Wage Garnishment

Obviously, the best way to prevent a wage garnishment is to stay current on your taxes; however this is not always easy. If you receive a notice of levy from the IRS, contact the IRS as soon as possible. The best thing to do is to set up an appointment with them to discuss other options. Most of the time a wage garnishment or wage levy can be a much harsher financial burden than the other options that are available. There are many options out there than wage garnishment. A few of the most common options are the following:

Setting up an Installment Agreement with the IRS

The IRS understands that some individuals cannot pay the entire amount owed and they are willing to work with individuals to set up payment plans to ensure that they will collect the money owed by the tax payer. These installment agreements allow for the tax payer to pay the entire amount of tax in smaller, more manageable payments over a period of time.

Partial Payment Installment Agreement Option

This method is similar to the prior option, but the tax payer does not pay off the entire amount owed in taxes. Under this method the tax payer goes under financial review every two years and this could increase the payment owed by the tax payer or the agreement could be terminated if the tax payers condition improves.

Submitting an Offer in Compromise (OIC)

This method is available for tax payers who have exhausted the previous two options and are not able to make the payment in full or the payments in installments. An OIC allows tax payers to settle their tax debts for less than the full amount. This option will only work if it is in the best interest of both the taxpayer and the government and promotes voluntary compliance with all future payments and filings. Tax debt on an individual can be compromised if doubt exists that the tax is correct, there is doubt as to collectibility or collection of the tax would create a financial hardship or would be unfair and inequitable.

Bankruptcy

Bankruptcy can seriously hurt a person's credit making it very difficult for an individual to obtain any kind of financing in the future and should only be used if all other options are exhausted. When Bankruptcy is filed tax debts may be eligible for discharge under Chapter 7 or Chapter 13.

Currently not Collectible

When analysis of the IRS indicates that the tax payer is unable and has no ability to pay their tax payments the tax payments maybe waved. After this all subsequent refunds are withheld and subsequent actions may cause recurring collectibility determinations at later dates. When that tax payer is determined to be Currently Not Collectible the IRS will not currently pursue collection.

How To Get a Wage Garnishment Released

If you believe that the amount you are left with is insufficient for basic necessities like food & shelter you are very likely to be able to get a wage garnishment lifted. The best place to start is to call the IRS and try to set up an appointment and try to work out a different agreement with them. It may be difficult dealing with the IRS directly, they will always push for you to pay the total amount owed no matter what your circumstances, but there are ways around this. There are many companies out there that specialize in these situations and know what is required to get a wage levy or IRS wage garnishment released within 5-7 business days.

Good tax resolution firms will give you a tax analysis with no obligation so you can find out what your feasible options are and what service fees would be. A diverse tax firm with deep experience can give you the quickest results and best outcome with not only releasing the wage levy but also in coming to a resolution with the IRS. It is always best to use a tax firm with a diverse set of tax professionals (CPAs, tax attorneys, former IRS agents, Enrolled Agents) as some professionals are better with one type of tax problem over others.