How to Stop IRS Wage Garnishment
As part of the IRS collection process, the IRS may file a notice of levy on your property. After a tax lien is issued, the IRS has a claim to your property, including your car, boat, or house. A lien can also take claim of your bank accounts, retirement benefits, and income. This includes wage garnishment where the IRS can take money from your paycheck before you get paid.
What Is Wage Garnishment?
Wage garnishment is a means to collect money directly from your paycheck before you are paid. If you're facing wage garnishment, it's likely you were having problems paying a creditor. If there is a judgment against you, your employer will take money from your paycheck to pay this creditor. If you have a tax lien for unpaid taxes, the IRS can garnish your wages to pay your tax debt.
How Much of Your Wages Are at Risk?
Under federal law, most creditors are limited to garnish up to 25% of your disposable wages. However, the IRS is not like most creditors. Federal tax liens take priority over most other creditors. The IRS is only limited by the amount of money they are required to leave the taxpayer after garnishing wages.
Tax levies on wages, salary, and other income are based on a table, depending on the debtor's pay period, filing status, and number of dependents claimed.
For example, using the IRS 2021 tables, a debtor who is paid biweekly, claims one dependent, and is filing single has only $648.07 exempt from their wage garnishment. If the taxpayer earned $2,500 for that paycheck, the top $1,851.93 would be taken as part of the IRS levy.
For an earner who is paid biweekly, married filing a joint return, and with 3 dependents, the amount exempt from the tax levy is $1,461.52. If the taxpayer earned $2,500 for that paycheck, the IRS would take $1,038.48
Stopping Your Wage Garnishments
To stop the IRS from taking money from your paycheck for a tax debt, you need to have the tax lien released. Your personal financial situation will determine what action is best. When in doubt, contact an experienced tax attorney for advice about which option may be best for you and your family.
Challenge the Tax Assessment
If you do not file a tax return, the IRS can file a substitute for return. The substitute return may fail to take into account your deductions and credits, saying you owe more than you do. You should not have to have your wages taken for a tax debt based on incorrect tax information.
If you disagree with the IRS tax assessment, you can challenge IRS tax findings, audits, or liens through the U.S. Tax Court or the IRS Office of Appeals.
Pay Off Your Tax Debt
The IRS will automatically release a tax lien when the taxpayer pays off their tax debt. Once the IRS issues a release, it may take a few days before your employer accepts the release and will no longer garnish your wages. Unfortunately, paying off the full amount of back taxes is not an option for many taxpayers who owe more to the IRS than they have in the bank.
Immediate Economic Hardship
The IRS can also release a levy against your wages if it is causing an immediate economic hardship. This is determined on a case-by-case basis. According to the IRS, "economic hardship" means "the levy prevents the taxpayer from meeting basic, reasonable living expenses."
However, a suspension of the tax levy for economic hardship may only be temporary. If the IRS determines that your situation has changed, they may reimpose the levy and start taking money out of your paycheck again.
The IRS may be willing to agree to an individual payment plan to remove the tax lien in exchange for making regular payments against your tax debt. A payment plan still requires the taxpayer to pay off all their tax debt, including penalties and interest. However, the payments can be made over time and as long as you continue with the terms of the installment agreement, the IRS should withdraw the lien.
Offer in Compromise
If you owe more in taxes than you will likely be able to pay off, an offer in compromise may be your best option. An offer in compromise (OIC) is an agreement with the IRS to clear your tax debt with a lump sum payment or through periodic payments. The IRS will only grant this option as a last resort, based on the taxpayer's income, expenses, assets, and ability to pay. Talk to your tax lawyer about how to clear your tax debt with an offer in compromise.
Is the IRS Garnishing Your Wages? An Attorney Can Help
It's frightening when you receive a notice of intent to levy and your wages suddenly drop. Many people ignore IRS notices, hoping that the problem will go just go away. Taking action now can get the lien released so you can move on. Contact an experienced, local tax law attorney to find out how you can recover from IRS wage garnishment.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.