IRS Wage Garnishment

If you fail to pay your federal taxes, the Internal Revenue Service (IRS) has a variety of methods that it utilizes to obtain due money – none of which will be better for financial situation that paying outright. One of the most debilitating actions the IRS can take is garnishing (seizing) one’s wages for payment. Unfortunately, such action is one of the most common collections procedures utilized.

Before Wage Garnishment

Luckily, wage garnishment does not come from out of nowhere, and certainly there are warning signs and ways to prevent such action from being taken. While it might seem hard to believe sometimes, the IRS really is not trying to bully you and cheat you out of your hard-earned money; they just need the taxes that you rightfully owe. Once your tax payments are past due, you will receive a notice in the mail that will demand payment within 10 to 30 days.

If you receive such a notice, it is time to act. Your tax debt will not go away on its own, but rather the balance will grow quickly through compounded interest and late fees. If you have not already done so, contact the IRS immediately after receiving such a notice to set up an installment agreement, or payment plan. By agreeing to make monthly payments on your tax debt and following through with your promise, you will be preventing more drastic collections efforts from taking place.

If you fail to pay your debt or to negotiate a payment plan after you receive the first notice, you very likely will receive an official “Final Notice” that stipulates the intentions of the IRS to obtain a levy against your assets. A levy can be used legally to seize any of your real or personal property, and wages (which are considered personal property) often are the target of this tool.

Included on the “Final Notice” will be a disclaimer that you have the right to hold a hearing on this action, should you so choose. The IRS may not levy your wages without court approval, but this is very easy for them to obtain. You will have 10 days after this notice to act before the IRS will begin the wage garnishment process.

Once the IRS has a levy against your wages, your employer will be contacted about his or her legal obligation. Your employer must withhold a specific sum of money from each of your paychecks for transmittal to the IRS for tax debt payment. The amount that is withheld usually is about 30-70% of one’s paycheck, the specific amount determined by a variety of factors including the amount of taxed owed and the number of dependents.

The determined amount will be seized from each and every paycheck either until the debt is paid in full, or until someone acting on your behalf arranges for a wage garnishment release. Even the self-employed are not immune from wage garnishment. In this situation, the levy must be applied by accounts receivable rather than by one’s employer.

It goes without saying that wage garnishment can be financially devastating for a taxpayer who already is having trouble staying afloat in a sea of bills. It can make a difficult situation unbearable, so preventing it in the first place is your best course of action.


After Wage Garnishment

If you have received a past-due notice for your taxes, the most important action to take is some action. Respond to the IRS’s concerns. If you can pay your debt in-full, obviously do it. If you cannot, tell an IRS representative. You may be surprised at his or her understanding.

If you are willing to work out a payment plan with the IRS, they certainly will be willing to work with you in return. If it really is impossible for you to make any payments whatsoever, your debt even may be considered “uncollectible” until your financial situation improves.

If it is too late for such advice in your case, however, and wage garnishments already have taken affect, you can take action to obtain a wage garnishment release. You may attempt to negotiate with the IRS directly, or you may wish to hire a tax attorney who may be more effective.

In general, the IRS may release the levy completely if you pay in full, if you negotiate a payment plan, if you can prove that your economic situation makes it impossible for you to pay without enduring hardship, or if you agree to an offer in compromise in rare cases. When the garnishment cannot be rescinded completely, the IRS may lower the amount that they seize from your wages in the context of a payment plan.

Conclusion

Wage garnishment may seem like a drastic collections measure, but you can act beforehand to prevent it from being implemented. If you already have found yourself affected by this devastating collections technique, however, then you can find much success in working with the IRS to come up with a new solution. No matter what, act as quickly as possible to ensure that your difficult financial circumstances do not become worse.