Tax Wage Garnishment: Frequently Asked Questions (FAQs)
Below you fill frequently asked questions (FAQs) regarding IRS wage garnishments or wage levies. We have also included some information on state wage garnishment as well. Please contact us if you would like us to answer additional questions.
What Is a Wage Levy In Regards to Taxes?
Also called wage garnishment, an IRS wage levy is when the Internal Revenue Service legally takes money directly from your paycheck to satisfy taxes owed. The IRS contacts your employer, tells them how much to pay you, and instructs them to send the rest of the money to the agency. The states have the same enforced collection action with the ability to levy wages just like the IRS.
How Much of My Wages Can the IRS Take?
When the IRS tells your employer to garnish your wages, the agency sends publication 1494 to your employer. The table dictates how much you get paid, and the IRS takes everything over that amount. Your filing status and the number of exemptions you claim determine the amount per paycheck you get to keep.
For example, as of 2017, if you are a single person claiming two exemptions and your employer pays you weekly, the IRS allows you to keep $277.78 per week, and the agency garnishes the rest. If you are married filing jointly with three exemptions, you receive $477.88 per week. All wages and bonuses over that amount go to the IRS. See the table link above to determine what the IRS will leave you with based on your filing status, exemptions, and frequency of pay.
Can the IRS Levy Bonus Payments?
Yes, the IRS can levy a bonus check that your employer pays separately from your regular paycheck. In this case, if you still owe taxes, your employer will send your whole paycheck to the IRS since the amount exempt from levy was paid to you already for the particular pay period in question.
Can You Stop IRS Wage Garnishment?
Yes, once the IRS has started to garnish your wages, you can stop the process. You need to contact the IRS to set up some agreement or resolution. Alternatively, you can apply for an offer in compromise or try to get declared as uncollectible. See this page for more information on stopping and releasing IRS wage garnishment.
Can You Stop State Wage Garnishment?
Every state, for the most part, works differently. Some states will lower the wage levy but not completely remove it until you pay off your tax balance or show hardship. For example, CA’s Franchise Tax Board and North Carolina’s Department of Revenue will usually not release a wage garnishment (only reduce it) unless you can prove severe financial hardship.
What Are the Laws on IRS Wage Garnishments? What Are My Rights?
Legally, for the IRS to garnish your wages or levy any of your assets, the following three things must happen (with exceptions in some cases):
- The IRS must assess a tax liability and send you a notice to demand payment.
- You must ignore the notices or refuse to pay the amount due.
- The IRS sends a “Final Notice of Intent To Levy and Notice of Your Right To a Hearing,” at least 30 days before the levy starts.
If you ignore that final notice, the IRS can start to garnish your wages once the 30 day period has elapsed. There are exceptions whereby the IRS does not need to give you 30 days from a Final Notice of Intent to Levy.
If the IRS feels the collection of tax is in jeopardy, they don’t have to follow the rules above. If you are a federal contractor with tax debt, or the IRS issued a Disqualified Employment Tax Levy, they do not have to offer you a hearing 30 days in advance of the levy taking place.
What Section of the Internal Revenue Code Gives the IRS Authorization to Levy?
Section 6331 of the Internal Revenue Code authorizes the IRS to levy taxpayers to collect back taxes.
What Kind of Wages Can the IRS Take or Levy?
The IRS can seize wages, salaries, commissions, dividends, and payments on promissory notes held by someone else. The IRS can also levy your bank account, someone else’s bank account (if you are joint account holder), federal retirement annuity income from the Office of Personnel Management, federal contractor payments, retirement accounts, your house, car, and other property.
What Types of Property Are Exempt from an IRS Levy?
The IRS cannot levy unemployment benefits, Social Security Disability Insurance, specific annuity and pension payments, workers compensation, certain public assistance payments, assistance under the Job Training Partnership act and court-ordered child support payments. Furthermore, the IRS cannot levy necessary schoolbooks and clothing, as well as precise amounts of fuel, furniture, books and tools for business, professions and trades.
How Can I Avoid a Tax-Related Wage Garnishment?
The best way to avoid a tax-related wage garnishment is to stay on top of all required tax filings. Pay all amounts owed to the IRS and State (if applicable). If you cannot afford to pay the IRS or State, contact a licensed tax professional for help. You can request one by calling our free tax consultation number above. Realize that the IRS and many states have tax options depending on your financial and tax situation. For example, payments plans, settlements, penalty reduction, and so forth.
How Can a Tax Professional Help With IRS or State Wage Garnishment?
Tax professionals analyze the situation and help you come up with the best resolution for your needs. In particular, a tax professional can put a hold status on a levy and negotiate an agreement on your behalf. The hold stays in place during the entire negotiation. Therefore, you don’t have to worry about the IRS garnishing wages during this timeframe. If you don’t agree with the amount due, a tax professional can submit an appeal for you. Furthermore, they can analyze your financial situation to get you the best resolution with the IRS or state.