If you owe back taxes to the Internal Revenue Service, it has the authority to garnish your wages. The IRS does have the authority to garnish some of your wages. But it must follow strict guidelines surrounding the procedure, which means any wage garnishment shouldn’t come as a surprise to you.
Here’s a closer look at what wage garnishment entails and the process leading up to this situation.
What Is Wage Garnishment?
When you owe a tax debt, the IRS has the legal authority to seize your property to cover the debt. The available levies can include taking money from your bank account, seizing assets to sell and wage garnishment. If the IRS pursues wage garnishment, a portion of your paycheck will be sent directly to the IRS. While the IRS cannot take all of your wages, it can take enough to put pressure on your financial situation.
Can the IRS Garnish Wages Without Warning?
The short answer is no. If you rack up a balance of back taxes, the IRS is required to send you a series of notices to pay what you owe. The notices start with demands for payment, which include notice numbers CP14, CP501 and CP503.
If you don’t make any changes, the IRS will send a CP504 notice, which is the notice of the IRS’s intention to levy. The levy can include property seizure and wage garnishment. Within this notice, you’ll find information about what you owe and your payment options. In general, you’ll have the option to pay the full amount or set up a payment plan. Ignoring this notice will likely lead to wage garnishment.
If you need help going through the process, consider working with a reputable tax relief service like Tax Relief Advocates.
How Much Money Can the IRS Garnish From My Paycheck?
Wage garnishment is a scary situation. The good news is that the IRS can only take some of your paycheck. The agency must follow strict rules about how much it can take from your wages to satisfy a tax debt, which is based on your filing status, number of dependents and the pay period.
For example, if you are married, filing a joint tax return with two dependents, and making $2,000 every two weeks, $1,426.92 is exempt from the levy. With that, the IRS would pull approximately $573 out of every paycheck. You can find out what is exempt for your situation through IRS Publication 1494.
How To Stop Wage Garnishment
No one wants the IRS to garnish their wages. Whether the IRS has already started garnishing your wages or you’ve received your first notice about garnishment, it’s possible to stop the situation in its tracks.
In general, the levy cannot be stopped unless you meet one of the following requirements.
- Pay off the tax balance. If this is an option for you, it can make all of these back tax issues go away.
- Set up a payment arrangement with the IRS. You can try to set up a monthly payment plan with the IRS. While a new monthly payment might put pressure on your budget, this gives you more control and avoids the uncomfortable process of wage garnishment.
- You prove financial hardship. The IRS may step back from the garnishments if you can prove it’s causing financial hardship. According to the IRS, a hardship occurs “when we have determined the levy prevents you from meeting basic, reasonable living expenses.” If you are in this situation, call the IRS to explain your finances immediately.
- File an offer in compromise: An offer in compromise is an agreement that settles the tax debt for less than the full balance. If you want to pursue this option, consider working with Tax Relief Advocates. A knowledgeable team can help you navigate this process.
- The collection timeline runs out. In general, the IRS has ten years to collect on your tax debt. If the clock runs out, you might be in the clear.
- You file for bankruptcy: If you go into bankruptcy, the IRS generally cannot continue collecting on the tax debt.
It’s possible to stop wage garnishment. But the right strategy will vary based on your situation.
Wage garnishment is an uncomfortable financial situation. Depending on your circumstances, it might be possible to avoid this unwelcome outcome tied to your tax debts. While you can navigate the system on your own, working with a reputable tax relief service, such as Tax Relief Advocates, might streamline your path to clearing your tax debts.
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