What Is Wage Garnishment?
A wage garnishment doesn’t happen overnight. Once you fail to pay the taxes you owe, the IRS will begin sending you letters asking for payment by a specific date and informing you of your options. If you don’t respond to these notices, the IRS can then place a lien on property you own, such as homes, automobiles, or financial assets (including your income).
This legal claim protects the government’s interest in these items. Upon placing a lien on your account, the IRS can then notify you of its intent to levy your wages. There’s a time limit on reversing levy action, so don’t delay in getting help.
How Much of Your Wages Can the IRS Take?
The IRS uses this table to calculate how much of your salary is exempt from the wage levy. If you happen to receive a bonus while the IRS is garnishing your wages, you won’t receive any of the bonus because the IRS only allows you to keep that exempt portion of your salary.
If you are self-employed, you’re not off the hook! The IRS will send a similar letter to your accounts receivable, instructing them to send the money directly to the IRS instead – which means your customers now know you owe taxes! If you need wage garnishment help, you should act immediately.
Wage levies are continuous. The IRS does not need to issue a new form for each period. The wage levy will continue until your taxes have been paid in full (including the penalties and interest) or you take action and stop the garnishment. Let us help you!
Tax Wage Levy Relief Options
Once you receive notice that the government intends to levy your income, you can take several steps to stop or reverse the action. Here are a few ways to release an IRS wage garnishment that the professionals at CitoTax can help you navigate:
Filing an Appeal
You have 30 days from the date of your levy notice to file the appeal, which requires completing and submitting IRS Form 9423. Upon receiving the document, the IRS must temporarily stop all garnishment/collection actions until making a decision regarding your tax situation.
Paying the Amount You Owe
This is the simplest way to stop a levy, provided you have the financial means to do so. The agency accepts payment via credit and debit cards, and you could also take out a personal loan or make a withdrawal from your 401(k) plan. Requesting a short-term extension of up to 120 days is another method, but you will incur a penalty of 0.5% per month on the balance.
Proving an Economic Hardship Created by the Levy
Wage levies can create a significant burden for a taxpayer, and the IRS must leave you with at least enough money to cover your household expenses. If you can prove that the levy exceeds this threshold, you can ask the IRS to release it. You’ll likely need to submit pay stubs, bank statements, and other relevant documents supporting your case.
Setting up an Installment Agreement
You can apply for a payment plan by filling out and returning IRS Form 9465. If the agency approves your application, it will stop the wage garnishments unless you default on the payments. You won’t need to submit any supporting financial documents if you owe $50,000 or less.
Making an Offer in Compromise
If you can demonstrate that paying your taxes owed in full is not a realistic option, you may be able to settle it via an Offer in Compromise (OIC), which allows you to resolve your owed taxes for a portion of what you owe, with the IRS forgiving the remainder. Once you pay the agreed-upon amount in full, the IRS will stop the wage garnishment.
Applying for the Fresh Start Program
If you owe $25,000 or less in back taxes, you might be eligible for this IRS initiative. To qualify, you must have made at least three consecutive installment payments and your account must be in good standing. You must also agree to an automatic bank withdrawal for future payments and file tax returns on time. Upon your acceptance into the program, the IRS will file to remove any liens and stop garnishment activities.