Can The IRS Garnish Your Wages?

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If you owe back taxes to the Internal Revenue Service (IRS), they can garnish your wages. But it must follow strict guidelines. This means wage garnishments will rarely be a surprise to you and that there may be a way to stop it if you’re proactive.

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 a strain 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. It’s at this stage that wage garnishment becomes a real possibility unless you take action to resolve your tax obligation or reach out for professional help.

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?

Although wage garnishment can seem like an inescapable situation, you should know there are limits. “This IRS will garnish wages that are above the standard deduction amount. In 2024, this is the amount above $29,200 for married filing jointly and $14,600 for single individuals), divided by the pay periods,” says Gary Massey at Massey and Company CPA.

Also, the IRS can only take a portion 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.

“There’s no maximum amount that the IRS can take. Instead, there is a minimum amount that the IRS must leave you to pay your bills,” says Logan Allec, CPA, with Choice Tax Relief. He explains, “For example, using Publication 1494, you can see that in 2024, the minimum amount that the IRS has to leave you in your biweekly paycheck if you’re single with no dependents is $561.54.”

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 before it begins, or even if it has already started.

In general, the levy cannot be stopped unless you meet one of the following requirements.

• Pay off the entire 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 may no longer be liable for the debt.
• 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. However, the right strategy will vary based on your situation.

How Does My Employer Know to Take Money from My Paycheck?

When the IRS decides to garnish your wages, they issue a formal legal notice, Form 668-W, called a “Notice of Levy” to your employer. This document instructs your employer to withhold a specific amount from your paycheck and remit it directly to the IRS. “Employers who fail to submit the funds required by the garnishment to the IRS are subject to a 50% penalty,” says Gary Massey.

According to the IRS website, “Your employer will provide you with a Statement of Dependents and Filing Status to complete and return within three days. If you do not return the statement in three days, your exempt amount is figured as if you are married filing separately with no dependents (zero).”

The employer is legally obligated to comply with this notice and begin the garnishment process, usually with the next pay cycle following receipt of the levy notice. As mentioned, failure to comply with this directive could result in penalties for the employer, including fines or being held liable for the amount that should have been withheld.

Final Take

Wage garnishment is an uncomfortable financial situation. Depending on your circumstances, avoiding this undesirable outcome tied to your tax debts might be possible. 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.

Aja McClanahan contributed to the reporting of this article.

Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.

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