As the tax deadline approaches there are some people stressing out as they realize that they owe money this year. Perhaps they used tax software to get their tax forms completed and they noticed that the amount owed greatly exceeds money that they have right now. Panicked, they worry about the IRS collecting its dues by going after their wages or savings.
Can the IRS garnish your wages? Or can the IRS take money from your bank account? If you know that you owe and are worried about theses possibilities, read on to find out.
What is an IRS Tax Levy?
What is an IRS Tax Levy? Having an IRS tax levy basically means that the IRS will seize your property or garnish your wages for taxes owed. For some tax payers, that includes the IRS garnishing their wages to collect on the tax debt.
- The IRS sends you a Notice and Demand for Payment
- You can contact the IRS to work out a compromise or you ignore them
- If you ignore them, the IRS will then send you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing at least 30 days before they impose the levy
Needless to say ,ignoring the IRS and hoping the problem will fix itself is NOT the answer. The good news is that you can prevent an IRS wage garnishment or bank levy if you’re willing to put some effort in.
Avoid an IRS Tax Levy by Communicating
It may seem counter-intuitive to your gut reaction if you owe a large amount to the IRS. Who would want to deal with the IRS when they know that they owe? The truth is that if you are willing to talk to and work with the IRS, many times you can work out a payment plan that fits your budget.
As I mentioned before, if you don’t have enough money to pay your taxes you do have a few options:
- Request a smaller amount: Using Form 656, you can give a settlement amount and explain why the amount owed on the 1040 would be an extreme financial hardship. Please go into detail and be prepared to make a reasonable offer that works within your budget.
- Create a doable payment plan: If you need time to get the money to the IRS, you can also request a payment plan that will break up the amount owed over a specific period of time. You have to fill out Form 9465 and call the number on your letter to confirm that everything is done correctly. Please note that there are fees involved with the payment plan, but it’s much better than having your paycheck garnished.
Thoughts on Preventing Your Wages from Being Garnished
Have any of you been in a position where you owed more money than you could afford come tax time? How did it work out for you?