As a citizen of the United States, it’s your responsibility to pay taxes every year. However, sometimes there are extenuating circumstances that prevent people from paying their taxes on time. Whether it’s due to financial or personal reasons, you need to be aware that the IRS has an aggressive collections method to secure the payment of back taxes. It’s called the IRS wage garnishment, also known as IRS wage levy. A wage garnishment requires employers to withhold part of a person’s income or wages for the purpose of paying off a debt. Along with the IRS, wage garnishments can also be issued by courts and federal agencies.
How Does Wage Garnishment Work?
The IRS typically enforces garnishment of wages by doing the following:
Alert the Taxpayer
The IRS will start by sending you a notice and demand for payment.
If you ignore the first notice or simply do not pay the owed amount, the IRS will respond by sending you a final notice at least one month in advance. The notice serves as intent to garnish wages and your right to have a hearing.
Garnishment of Wages
The final notice to garnish wages can be served by the IRS in the following ways:
- In person
- Taxpayer’s home
- Place of business
- Taxpayer’s last known address (by certified or registered mail)
The IRS is only responsible for sending the final notice to the last known address it has on file for the recipient, meaning that you do not really need to receive the notice in order for it to be applicable. In fact, many taxpayers experience wage garnishment without receiving an actual notice. This is because the IRS may not have a recent or current address for some taxpayers, particularly those who haven’t paid their taxes in a while.
Employers & Wage Garnishment
When it comes to employers and wage garnishment, there are a couple of important things to keep in mind. First, a notice is also sent to your employer, informing them to withhold a certain amount of your wages. This amount goes directly to the IRS as payment for your back taxes. Your employer is not allowed to refuse the wage garnishment, as doing so will subject them to be held personally liable for the money owed to the IRS.
Wage garnishments are usually taken out of payroll in a particular order. It starts with federal tax, local tax and finally other garnishments, such as those from consumer credit cards. Under federal law, wage garnishments are restricted to 25% of your disposable income, if that amount is more than 30 times the federal minimum wage. However, some states have different laws regarding garnishment of wages. The maximum garnishment level in several states is lower than 25%.
Stop Wage Garnishment
Once an IRS wage garnishment is enforced, the ramifications will continue until the entire debt is paid off, or other arrangement can be made to settle the tax debt. Fortunately, it is possible to stop wage garnishment in many cases of tax debt. When you receive a notice of intent, the first thing you should do is contact the IRS in an effort to make amends. It may be possible to set up some type of agreement with the IRS, which is a lot easier and less embarrassing than having your employer receive an official wage garnishment letter.
In some cases, it may be necessary to enlist the support of tax professionals that can contact the IRS for you to negotiate stopping wage garnishment. Other possible solutions or situations that can serve to stop wage garnishment include an installment agreement or repayment plan, offer in compromise or filing bankruptcy. There is no doubt that the best solution to stop wage garnishment from occurring in the first place is to pay your taxes on time. However since this isn’t always possible, it’s good to know that there are certain ways to alleviate the process of wage garnishment.