Wage Garnishment Laws

When you owe money to the Internal Revenue Service, the agency has several ways to collect. Taxpayers are often most afraid of wage garnishment. That's where the IRS pulls money directly from your wages each month to satisfy an unpaid tax bill. It can reduce your take-home pay and limit your day-to-day spending, so wage garnishment can have a broad impact on your life.

U.S. tax law requires the IRS to follow a specified process whenever it tries to collect tax debts, including when the agency attempts to garnish your wages. These rules have been put into place to protect the taxpayer. To take full advantage of these protections to stop wage garnishment, you must take action before the IRS begins garnishing your wages.

Wage garnishment is the final step in the process of collecting back taxes. You will have better opportunities to challenge IRS findings or work out a payment deal when you are first notified the agency believes you have unpaid taxes than you will after it has begun to pull money from your paycheck.

IRS vs. Other Types of Wage Garnishment

You may already be familiar with the concept of wage garnishment as a tool that creditors use to collect the money they are owed. It's important to understand that different rules apply to the IRS. In most cases, a creditor must get a court order to garnish the wages of someone who owes them money. This gives the individual whose wages are targeted for garnishment the opportunity to defend themselves in court.

The IRS doesn't need a judge to sign off on any wage garnishment to collect unpaid taxes. That doesn't mean the taxpayer is without any protections or opportunities to contest the garnishment. Federal tax law provides several avenues for challenging any IRS determination that you owe taxes or for reducing the amounts you owe.

IRS Wage Garnishment

When discussing the IRS's power to garnish wages it helps to know that the agency doesn't necessarily use the term "wage garnishment." That's because it's an issue to tax levy on your wages. A tax levy is when the government takes your property to satisfy a tax debt. In the case of a wage levy, the property seized is a portion of your paycheck.

When Can the IRS Issue a Levy?

The IRS issues an income tax levy when you have an unpaid tax liability and have not made arrangements to pay your tax debt. The agency will then determine that it is the appropriate action. 

A key aspect of the IRS levy is that the property need not be in your possession for the agency to place a tax levy on it. Property that belongs to you, but is in the hands of someone else, can also be subject to levy. Because your wages are legally your property, but in the hands of your employer, the IRS can subject them to wage garnishment under a levy.

In most cases, the IRS can only issue a tax levy after the agency has met four requirements:

1. A tax has been assessed by the IRS and you have been given notice and a demand for payment
2. You don't pay the tax owed
3. The IRS sends you a final notice of intent to levy and notice of your right to a hearing at least 30 days prior to the levy being issued
4. The IRS sends you advance notification of third-party contact to tell you that the agency may be contacting other parties about collecting the tax you owe

If these conditions are met, the IRS will act.

How Much Can the IRS Garnish?

In most cases, the IRS can't garnish all of your wages. They are required to leave you some money to live on. The amount the IRS exempts from levy is based on the standard deduction you are eligible to claim and the number of dependents you have for the tax year. However, it is not the IRS that calculates the exempt amount. That's done by your employer.

To calculate the amount that is exempt from garnishment, the IRS will mail your employer a copy of Publication 1494, Tables for Figuring Amount Exempt from Levy on Wages, Salary, and Other Income. According to the 2024 version of the publication, if you are single and paid every two weeks, you will only be allowed to keep $561.54 each pay period. If you are married with two children, that amount rises to $1,507.70 for each two-week pay period.

Once it has completed its calculations, your employer will provide you with a Statement of Dependents and Filing Status to fill out. If you fail to complete your portion of the statement within three days, you will be treated as married filing separately, with no dependents. If that happens, you will only be allowed an exemption of $561.54, even if you would otherwise have been entitled to more.

Can I Challenge an IRS Wage Garnishment?

A wage garnishment is a form of tax levy, so it must be appealed within 30 days of receiving an IRS notice of final intent to levy. The easiest way to get the IRS to remove a levy is to pay your tax bill or set up an installment agreement with the IRS. 

You can request an appeal in the following situations:

• The IRS made a mistake in assessing the debt
• The tax debt has been paid
• You are in bankruptcy proceedings
• The statute of limitations for collections has expired
• You were not given a previous opportunity to appeal

To notify the agency that you intend to appeal a levy, mail a completed Form 12153, Request for a Collection Due Process or Equivalent Hearing, to the IRS.

Once the IRS has started collecting the wage levy, your options for challenging are more limited. Your best option for getting the levy released is to either pay what you owe or prove that the wage levy is causing you immediate economic hardship. The IRS is also required to release the levy in the following situations:

• You have already paid the amount owed
• The statute of limitations for collecting the tax debt has expired
• Releasing the levy will let you pay your taxes
• You have entered an agreement with the IRS to pay in installments that calls for the levy to be released

If you meet one of these qualifications but are having trouble with the IRS, consider speaking to a tax law attorney for legal advice.

What if the Garnishment Is Causing Hardship?

If too much money is being taken from your paycheck and it is causing you immediate financial hardship, you should contact the IRS at the phone number listed on your garnishment notice to explain your financial situation. The IRS may arrange for the levy to be released. 

However, the levy release does not mean that you no longer owe the government money. The IRS will work with you to set up a payment plan or take other actions to pay off the balance owed.

Can I Be Fired Over Wage Garnishment?

While most people would probably prefer that our employers not know that their wages are subject to garnishment, you shouldn't have to worry about your employer firing you for your failure to pay taxes. Federal law prohibits employers from firing employees whose wages are subject to garnishment for a single debt. 

Those protections don't apply if you are the subject of multiple wage garnishments. In addition, some states let employers make employees reimburse them for the administrative costs that result from multiple garnishments.

Still Have Questions? Talk to a Tax Lawyer

If you owe money to the IRS and are worried that the IRS may garnish a portion of your wages, a local tax attorney can help. A tax attorney is a tax professional who understands the IRS collection process and can help you work your way through it. 

If you believe that you don't owe any taxes, a tax lawyer can help you appeal an IRS tax assessment through the agency's appeals process or in the U.S. Tax Court. If you aren't disputing that you owe money to the government, a tax lawyer can help you work with the IRS to pay your bill without resorting to wage garnishment.