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Wage garnishment hits hard in the least opportune moments.
When medical bills and necessities already have your back against the wall, the last thing you need is for your paycheck to unexpectedly be cut short.
The good news is there are things you can do to get the levy removed and get back onto the path forward.
This article will quickly explain what wage garnishments are, your legal rights, and ways to get a garnishment removed without declaring bankruptcy.
When you owe back taxes and haven’t established an agreement to bring your account current, the IRS can levy (seize) your income and assets.
One of the most common forms of levy is wage garnishment. This is when an employer is required by law to take some of the employee’s paycheck and send it directly to the creditor (in this case, the IRS.)
You’re not going to get a wage garnishment order in the mail; that information (Publication 1494) will be sent to your employer, and your employer will notify you.
But wage garnishments don’t pop up out of the blue; the IRS sends about five notices, over multiple months, before going to these extreme lengths.
For obvious reasons, it’s best not to wait until it reaches this point; it is in your best interest to immediately contact the IRS and resolve unpaid taxes as soon as possible.
If you cannot pay the full amount due, there are options available, and a licensed tax attorney can help find the best solution for your unique situation.
Good news: the IRS can’t take your entire paycheck.
But it isn’t limited by federal law (CCPA Title III) in the same way that other creditors and lenders are. The IRS decides how much to take based on an employee’s “disposable earnings.”
Disposable earnings are the amount left after legally required deductions are made, aka the “take-home pay.”
View your exemption amount in the 2022 IRS exemption table.
Your employer will provide you with two forms: “Statement of Dependents” and “Filing Status.”
You’ll have three days to complete and return the forms; if you miss the deadline, your exemption amount is automatically calculated as the standard deduction of 1 (26 U.S.C. § 6334(d)).
You do have rights in the wage garnishment process, but it’s your responsibility to be aware of and apply them.
To help you out, here are a few key things to know when you first receive word of wage garnishment.
Before the IRS can legally take any actions, they must get a hold of you. They must send a series of notices to ensure your collections due process rights.
However, once you receive a “Final Notice of Intent to Levy” (LT 11 or Letter 1058), you’ll have about 30 days to pay or make other arrangements.
The IRS will proceed with a levy or lien to collect the full amount owed if you don’t pay the balance.
You have the right to dispute wage garnishments, but you’ll have to act quickly.
Along with the “Final Notice of Intent to Levy,” the IRS will include a “Notice of Your Right to a Hearing” or something similar.
Once you receive that letter, the clock starts ticking.
You have 30 days to respond by making arrangements to pay the debt or file a dispute.
If you file a dispute, the court will hold a Collections Due Process (CDP) hearing where you’ll have the opportunity to present your case.
The CDP hearing is not the time to dispute the amount of taxes you owe. It is solely to address legal problems related to the garnishment, such as whether it was made in error, would cause undue harm, or is being carried out illegally.
You don’t have to navigate the IRS on your own; you have the right to authorize a tax attorney to help.
A tax attorney can help determine if the wage garnishment is valid and what your best options are.
February 9, 2022, the IRS announced it would suspend automated notices and letters - including intent to levy notices - while it worked through a backlog of unprocessed returns.
As of the date of this article, there has been no formal announcement of when the notices will resume, but the agency does warn taxpayers to resolve unpaid taxes quickly because interest and penalties will continue to grow.
The fastest way to remove a wage garnishment is to pay the money you owe in one lump sum, doing so will bring your tax account into good standing with the IRS.
If you don't have the funds to pay the IRS in full, options are available depending on your situation.
Below are a few payment options that can effectively stop wage garnishments.
Apply for a payment plan to repay your back taxes in installments over several months.
If you are approved for a payment plan, the IRS is generally prohibited, with certain exceptions, from continuing to garnish your wages.
The levy will remain lifted as long as you stay on track with the new agreement.
For taxpayers struggling to make payments, requesting a currently not collectible (CNC) status from the IRS may grant you some time.
If the IRS grants your request for CNC status, they will temporarily suspend the wage garnishment (and other collections actions).
It’s important to be aware that your unpaid balance does not disappear – this only provides temporary tax relief.
When your financial situation improves, the clock starts again, and IRS collections can begin anew.
While this method can offer temporary relief during difficult times, the amount you owe will continue to grow due to penalties and interest.
Another option is to apply for an offer in compromise (OIC), which you may know more commonly as a settlement.
Not everyone is eligible for an offer in compromise. To see if you qualify, the IRS will assess information about your income, assets, and expenses.
You must explore all other payment options before submitting an offer in compromise.
Total Tax can help by making recommendations and advocating on your behalf. If you are suffering financial hardship due to wage garnishment schedule an appointment for a free consultation with a local tax attorney by calling 855-383-4561.
Contact us today for a free consultation. Let us help you get the tax relief you need and deserve.
Everyday people just like you are contacting Total Tax after receiving a notice of Wage Garnishment.
Below are a few examples of recent tax settlements won in the last year.
Below are frequently asked questions about unfiled tax returns. Don’t see your question below? Check out our FAQ page or call (206) 966-4122 to have your question answered by a team member.
A garnishment judgment does not show up on a general credit report. However, tax debt is public information, making it harder to qualify for personal loans if the loan servicer knows you owe money to the IRS.
It may be possible to refinance your mortgage even with a wage garnishment, but it will likely be more difficult and come with a higher interest rate.
For wage garnishments, the amount depends on your exemptions. The IRS can take up to 100% of any earnings (income) above your regular earnings.
The IRS may garnish your wife’s bank account if you file taxes jointly or the account is connected to your SSN. Your wife may be able to remove the garnishment by filing for innocent spouse relief.
Remove your wage garnishment by bringing your tax account into good standing with the IRS. This may be paying the amount owed in one lump sum over a series of payments or filing for one of many forgiveness options available, depending on your situation.
Yes, taxes owed with wage garnishments accrue interest. The interest rate is currently at 6% and is subject to change quarterly.
