Life can get hectic, and it seems like when bad things happen, several happen at once. Maybe you were going through a rough patch and forgot to file your tax return. Nothing bad happened when you didn’t file, so the next year you didn’t worry about filing taxes. And the next year. And the next. Then, suddenly, you received a notice from the IRS of their intent to levy.
When the IRS takes a part of your paycheck, aka wage garnishment, it can leave you without enough income to live on. This is especially true if you are in a higher cost-of-living area.
Moreover, because it involves your employer, it is not only embarrassing, but it may even put your job in jeopardy. While it is illegal for an employer to fire you for having your wages garnished for “any one debt,” you may not be protected if you have additional wage garnishments from creditors other than the IRS. Furthermore, some employers see debt and money problems as a red flag that may change how they view their employees.
If you’ve received notice that the Internal Revenue Service intends to garnish your wages, or your wages are already being levied, it’s time to take action. There are several ways you can stop a wage garnishment by the IRS. The help of a tax expert can be invaluable for deciding the best course of action to successfully get your wage garnishment released and start receiving your full paycheck once again.
What is Wage Garnishment?
When you owe money to a creditor, they may try to collect on that debt by taking money from your paycheck, before it ever gets into your hands. This typically requires a court order to make these forced payments.
With the IRS, if you have past due taxes, they do not need to go through the courts before they can start taking a portion of your paycheck. First, they will send a notice of your tax liability, then they will send an “intent to levy” or garnish your wages. Finally, they will send you a notice of your Collection Due Process rights, which is a method of appealing their collection efforts. If you do not respond, they will begin to take a large portion of your paycheck.
How Much of Your Paycheck Can the IRS Take?
A regular creditor has very different rules for wage garnishment process than the IRS. Regular creditors or debt collectors are limited in what they can take from your paycheck. They can only garnish the lesser amount of either 25% of your disposable income, or any amount greater than 30 times the federal minimum wage.
Compared to the power of the IRS, these amounts are low.
The IRS follows a different set of rules governed by federal law. The actual amount they leave you with is based on your filing status, the number of dependents you support, and how often you are paid. You can find the table for 2023 here.
As an example, if you are married filing jointly and have two kids, and you are paid biweekly, any amount above $1,426.92 per each paycheck can be taken by the IRS. This will leave your family with just under $3000 in income per month on average. It can be hard to provide for your family on that amount, especially if you have large bills like student loan debts or mortgage payments. The IRS wage garnishment amount can easily leave your family in economic hardship.
Ways to Stop Wage Garnishment
A wage garnishment order can be very stressful, but there are multiple ways to put an end to getting your wages garnished and get your disposable earnings back. Some of your options will be dependent on your specific situation, since not everyone will qualify for every option.
- Before wage garnishment even starts, take advantage of your Collection Due Process rights: If you have received notice of intent to levy, you can challenge the IRS’ decision through a Collection Due Process appeal. You can challenge the IRS assessment of what you owe, or you can propose an alternative collection method or payment plan.
- Pay off your entire debt with a lump sum payment: This is the fastest solution, since once your debt is paid the IRS has no reason to collect any more money from you. However, it’s not likely that you have the money on hand if you’re in a situation where the IRS has resorted to wage garnishment. It may be an option to take on enough consumer debt that you can pay off the IRS, but that still leaves you with debt that must be repaid.
- Set up a payment plan like an installment agreement: Instead of letting the IRS decide how much you pay every month, you can set up a payment plan with an affordable monthly payment. Voluntary payments through an installment agreement will show the IRS that you are working to repay your debt, so they won’t need to collect from your paycheck.
- You may qualify to settle the debt for less than you owe through an Offer in Compromise: If you can show the IRS that it’s better to accept a smaller amount from you, an offer in compromise may be a good solution for you.
- Declare hardship: If you can show that wage garnishment is creating a financial hardship for you and your family, you may be able to temporarily stop the garnishment through a Currently Not Collectible However, you still need to address your problematic IRS taxes, because if your situation changes they may reinstate the garnishment procedure.
- File for bankruptcy: Bankruptcy filing will put a halt to the collection actions of all your creditors, not just the IRS. However, this is an extreme option and you should really talk to a bankruptcy attorney before going down this route. You cannot discharge debts like child support or federal student loans through bankruptcy, but you may lose your house and your car.
If you are able to put a stop to your wage garnishments, it’s important that you tackle your tax liability and make effort to pay off that debt. If you don’t, the IRS may pursue other collection tactics such as seizing your bank accounts, seizing your personal property, putting a hold on your driver’s license or other professional license, and more.
RELATED: Who Should File for Bankruptcy?
S.H. Block Tax Services Can Help YOU Stop Wage Garnishment
Tax debt can be extremely stressful, and the methods for stopping wage garnishment can be complicated and confusing. Wouldn’t it be nice to have a knowledgeable professional on your side? At S.H. Block, we have years of experience helping clients figure out the best way to stop wage garnishment, get debt relief, and put an end to stressful IRS collection techniques.
One of the biggest benefits of hiring a tax lawyer is that we can help you choose a payment method that is sustainable for you and your family, without causing additional financial hardship down the road. We also have experience in what kinds of offers the IRS will accept, so you don’t waste your time pursuing a plan for debt payments only to get rejected.
We’d be happy to schedule a free consultation with you, so we can discuss your tax problems and help you understand what your best options might be. Give us a call at (410) 872-8376 or complete this online form to get started on putting the money back in your paychecks, and making things right with the IRS.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.