When you fall behind on your federal income tax payments, you might think that your regular income is safe from IRS seizure. However, the IRS has the authority to garnish your wages for back tax debt and the agency often uses this process to recoup back taxes from delinquent taxpayers.

If you’re facing the prospect of an IRS tax wage garnishment, you may think that there is little you can do to prevent it. While it is possible to deal with an impending IRS tax wage garnishment on your own, stopping or preventing a wage garnishment can be a complex proceeding involving several tax regulations.

To handle this tax situation, you’ll need to find out the answers to the following questions:

• Who is subject to an IRS wage garnishment?
• What does the process involve?
• What can the IRS take?
• Can you stop an IRS wage garnishment?
• Where can you get help?

In short, wage garnishment is a process that allows the IRS to legally withdraw funds from an individual’s paycheck and wages in order to recoup existing tax debt. While wage garnishment is not exclusive to the IRS, the IRS only uses the process to collect unpaid federal income taxes.

Since wage garnishment is the last resort for the IRS, you should not take it lightly. In most cases, you will lose more money through garnishment than you would have if you cooperated in an alternative settlement. It is very important that you understand who can receive an IRS wage garnishment, how the process works, and your taxpayer rights.

Who Receives an IRS Wage Garnishment?

Even though the IRS has the legal authority to use wage garnishment, the agency only exercises this option in certain cases. In general, a taxpayer must owe a substantial amount of unpaid federal income taxes or payroll taxes to receive an IRS tax wage garnishment.

Before beginning the wage garnishment process, the IRS often attempts to contact the taxpayer to inform him or her of the amount due. A wage garnishment is only used when the taxpayer makes no attempt to contact the IRS or repay his or her tax balance for several months or years.

The IRS has a great deal of latitude when it comes to deciding how much of your wages to seize. According to the tax code, the agency is only required to leave you with enough funds to pay the necessary living expenses for your household.

For example, if a person who uses the head of household filing status and claims two dependents receives a wage garnishment, the IRS is required to leave at least $397 of his or her wages per week. Any earnings over that amount are up for grabs. However, the exact amount that is garnished will vary depending on each individual’s amount of unpaid taxes.

While the wage garnishment process may be unfamiliar to you, it is actually a very structured process which adheres to different rules and regulations. When the IRS pursues wage garnishment as the chosen method for satisfying a tax debt, agents must follow a certain procedure. By law, the agency is required to:

• Attempt to contact you multiples times. By law, the IRS is required to contact you several times before beginning a wage garnishment. This could be by phone, written letter, or email.
• Send a written notice of the impending wage garnishment. Before the IRS can actually begin to garnish wages, they must send you a written notice letting you know wages will be garnished if your tax debt is not immediately satisfied.
• Provide proof that the tax debt has been unpaid for some time. The IRS must provide tangible proof that your tax debt has been outstanding for a sufficient period of time to warrant a wage garnishment.
• Issue a final notice via registered mail 30 days before the wage garnishment begins. Finally, one month before your wage garnishment begins; the IRS must send a final written notice via registered mail.

If you have not responded to the notices after these steps have been completed, the IRS has the right to begin garnishing your wages. The process starts with the IRS contacting your employer and letting them know your wages are to be garnished. At that point, your employer is legally required to take out a portion of your pay and send it to the IRS. If your employer fails to cooperate, they will be held liable for the amount not garnished.

Taxpayer Rights

While the IRS has the legal right to garnish wages, you do have a few rights as a taxpayer. One of these protections is Title III of the Consumer Credit Protection Act. Under this act, you have the right to remain employed while your wages are being garnished. This act ensures that you’ll be able to keep your job, even though you are the subject of an IRS tax wage garnishment.

It is important to note, though, that this protection only applies to taxpayers who have one wage garnishment proceeding on their account. If you receive a second wage garnishment for a different debt or obligation, you are not covered by this protection and your employer will have the right to terminate your job.

Title III of the Consumer Credit Protection Act also allows taxpayers additional rights, such as:

• The right to have no more than 50 percent of earnings garnished for child support if there is another child to support.
• The right to have no more than 60 percent of earnings garnished for child support if there is no additional child to support.
• The right to limit the wage garnishment to no more than 25 percent of disposable earnings or the amount left over after 30 times the minimum wage has been calculated.

While the IRS clearly explains how much recompense they can collect, taxpayers often find these issues confusing. Individuals will ask questions like “Can the IRS really take that much?” or “I thought they had to leave me X amount!” While you do have rights, so does the IRS.

The IRS is allowed to garnish salaries, wages, bonuses, commissions, and even pension or retirement earnings in some cases. They will typically garnish around 20-25 percent of your income until the tax liability is satisfied. Because this is a serious legal issue, the IRS does not consider how much money you will have left to pay bills each month.

For example:

• The IRS brings a wage garnishment on an individual making $2,500 per month.
• The IRS has the right to take 25 percent of his wages through garnishment in this situation.
• This means the employer would pay the IRS $625 each month, leaving the debtor with $1,875.
• The IRS would keep collecting $625 each month until the tax debt is satisfied.

As you can see, the IRS can take large, significant portions of an employee’s wages. This is a serious issue and can often leave individuals in precarious situations.

If the IRS has issued a written notice of an impending wage levy, there are a few things you can do to prevent the wage garnishment from happening for some period of time. These actions range from rather drastic, to somewhat subtle. While most of these are not final solutions, they can significantly delay or reduce the effects of your wage garnishment.

How to Prevent Wage Garnishment

Some of your options for stopping a wage garnishment include:

• Make a case for financial hardship. If you can document that the wage garnishment will make it impossible for you to continue living or supporting your family, the IRS may not be able to proceed. Even if they don’t stop wage garnishment altogether, they may slightly reduce the amount they take.
• Change jobs. You may be able to avoid a wage garnishment if you quit your job and find work somewhere else. While this isn’t a solution, per say, it will usually take the IRS a few months to find your new employer and implement the levy. This can give you enough time to save money and pay off portions of the debt.
• Lower your income. If your income level is low enough, the IRS will have to declare your tax debt “uncollectible.” While this isn’t ideal for someone already struggling financially, it can work in some situations.
• File for bankruptcy. In some cases, IRS tax debt can be discharged through bankruptcy. If you receive sound legal advice that suggests pursuing bankruptcy, it could be a viable option.

How to Stop Wage Garnishment

Once a wage garnishment is in place, it can be difficult to stop it from continuing. The IRS’s main goal is to clear the account by resolving the unpaid tax, and the agency will continue garnishing your wages until the debt is completely paid off.

While each of the options listed below comes with its own unique advantages and disadvantages, they are all better than wage garnishment and the monthly financial strain it can create.

• Pay the IRS in full. The best way to stop an IRS tax wage garnishment is to pay your back tax debt in full. When your debt is cleared, the agency will have to cease the wage garnishment immediately. Options for paying in full include obtaining a bank loan with a lower rate, borrowing money from family members or friends, or refinancing a home or piece of property. You will save money in the long run and clear your financial record quickly if you can pay the IRS in full.
• Enter into a repayment plan. If you’re unable to pay off the entire tax balance, you can ask an IRS representative about establishing a repayment plan. You may be allowed to send in a monthly payment over several years, which will enable you to pay off your tax debt gradually. While your account will continue to accrue interest and penalties, you may find this is an easier method for clearing your account. The repayment plan will almost certainly have a lower payment amount than the monthly wage garnishment and therefore ease the additional strain on your finances.
• Offer in compromise: Another option for stopping wage garnishment is to file for an offer in compromise. This option, which is only available for select taxpayers, allows you to make an offer to settle your unpaid tax for a lower amount. Qualifying for an offer in compromise can be extremely difficult, since the IRS only grants this request in a few situations. There are typically three ways in which in individual can qualify for an offer in compromise:

(1) There is no doubt that the unpaid tax will be satisfied in the foreseeable future through standard IRS collection procedures.

(2) There is considerable doubt that the tax liability was assessed correctly and accurately.

(3) Certain circumstances exist that would cause significant hardship or harm to the taxpayer if the IRS were to collect the taxes owed.

Your application will be considered along with factors such as ability to pay, income, expenses, and asset equity. Should your application be approved, you have payment options. The lump sum cash option requires a 20 percent payment at the time of application with the remainder paid in five or fewer payments. The periodic payment option requires an initial payment, with monthly payments continuing until the debt is repaid in full. If you’re considering applying for an offer in compromise, consulting a qualified tax expert may be helpful.

Once the wage garnishment process is set in motion, you may want to contact a tax professional. When you’re dealing with the prospect of an IRS tax wage garnishment, it may be beneficial to talk to an experienced tax counselor or attorney.

Top Tax Defenders has over 27 years of experience handling complicated IRS matters and can provide the help you need to navigate this complex tax issue. Our tax specialists and attorneys will work hard to get you the best possible solution for your IRS tax wage garnishment. Contact us today to get the help you deserve.