IRS Wage Garnishment


What is an IRS Wage Garnishment?

IRS Wage GarnishmentAn IRS wage garnishment is one of the more powerful and perhaps, most preferred method of collecting tax debts. The Internal Revenue Service or IRS has the authority to encumber any property that may lawfully be applied as payment for delinquent back taxes owed by the taxpayer. Understanding the amount to be deducted in the taxpayer’s paycheck in an IRS wage garnishment can be very complicated. This is why many taxpayers will seek the help of a qualified tax attorney to lift the wage levy.

Defining “wages” under the IRS wage garnishment

The IRS wage garnishment can affect all wages, including incentives, bonuses and commissions. In addition, the actual computation of the amount to be levied depends, in part, on the marital status of the taxpayer. The amount to be deducted from salary of a taxpayer who is married/with dependents should not exceed 50% of their net income and 60% if single. Also, for taxpayers with income of 30 times the federal minimum wage, only 25% of their disposable income of a wage will be levied.


Ways to avoid an IRS wage garnishment

The final notice of demand for payment sent by the IRS will list the options a taxpayer has to avoid or stop the wage levy. The first and most obvious one is to pay the back taxes owed in full. But for most taxpayers in this situation this is simply impossible. The agency may also offer an IRS installment agreement in which the taxpayer will agree to pay the delinquent tax debt on a monthly basis until the amount is fully paid.

Another way of negating the effects is by proving that the wage levy causes financial hardship to the taxpayer. It is important to know that this will not remove the IRS wage garnishment; it will only temporarily stop collection and will resume once the taxpayer’s hardship is overcome or they have enough money to pay back the taxes owed to the IRS.

Other options to avoid an IRS wage garnishment

The Offer in Compromise or OIC is another option. This is available only if the IRS is satisfied that the taxpayer cannot pay back taxes and that the tax debt is uncollectible or that there is a doubt that the amount is actually owed by the taxpayer.

Caution: The agency will normally first send a series of notices advising taxpayers that they owe the IRS delinquent back taxes. And, the IRS will typically only levy wages if there are no responses to their notices by the taxpayer—so it’s important to take respond and deal with the problem early. Furthermore, the IRS will send notices to the taxpayers last known address of record. Not receiving the notice will not protect or exempt you from having your wages levied or otherwise avoid the IRS wage garnishment.

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