How to Stop or Release an IRS Wage Garnishment
Once you receive a final notice of intent to levy, you have 30 days to take action. If you do not reach out to the IRS by that deadline or request a hearing, the agency can contact your employer and move forward with the wage garnishment or wage levy. The garnishment continues until you pay the tax debt in full, you set up an agreement with the IRS, or until the arrival of Collection Statute Expiration Date for tax years that carry a liability. Luckily, there are some resolutions to stop or release an IRS wage garnishment.
The best resolution or resolutions, or the best course of action, is mostly based on your total balance, as well as your tax compliance and financial situation. In almost all the options below, you will need to be current on all your tax filings. In other words, you need to file all tax returns required before the IRS will consider setting up a tax resolution with you.
Ways to Stop or Release an IRS Wage Garnishment or Wage Levy
Request a Collection Due Process Hearing
A Collection Due Process or CDP hearing is a procedure of the IRS Office of Appeals. It is an independent organization within the IRS that is separate from the collection office that initiates the wage levy. If the IRS sends you a final notice of their intent to levy, you can request a CDP hearing 30 days from the date of the IRS’s notice of your right to a hearing. If you move forward with a CDP hearing, collection activity will usually cease (exceptions for jeopardy, a federal contractor, DET, and state refund levies).
You need to fill out form 12153 and send it to the address on the letter or the IRS revenue officer on your case. As you wait for your hearing, it is a good idea to work with a tax professional who can represent you and work out a tax resolution with the IRS on your behalf.
If you don’t propose a collection alternative, or offer a defense (e.g., innocent spouse relief) or claim hardship (discussed below), the wage garnishment can resume once the IRS issues a determination. See publication 1660 for more information.
An offer in compromise is a “collection alternative” the IRS will accept (if approved) to stop or release an IRS wage garnishment. An offer in compromise is settling your tax debt for less than you owe. You will have to apply for this option. It can be difficult, and you may want to get professional help.
The IRS has various payment plans, often referred to as Installment Agreements. You can work with a licensed tax professional or call the number on your levy notice. An installment agreement requires you to make monthly payments to the IRS. Once the IRS approves your payment plan, you are in good standing, and the wage garnishment stops.
If you can prove that the levy causes financial hardship, the IRS will declare you as uncollectible. The agency will temporarily pause all collection actions until your financial situation improves. To get uncollectible status, you have to provide a lot of detailed financial information to the IRS.
If you file jointly or did so in the past, you and your spouse are jointly responsible for the taxes owed. However, if the tax levy pertains to a year you filed together, and you do not feel you are responsible, you can dispute the tax liability. One way to do this is by applying for Innocent Spouse Relief (ISR). It is highly advised you work with a tax professional in proving your innocent spouse claim.
Filing for bankruptcy automatically stops the wage garnishment. In some cases, bankruptcy provides a means for a taxpayer to erase old tax debt. However, if you have remaining tax debt, the IRS can start the wage garnishment after the bankruptcy is complete. It also has a severe impact on your credit, and it should be a last resort. If you are considering this option, work with a bankruptcy attorney.
Ways to Negate the Effect of the Wage Levy
Reduce Your Income Enough to Be Declared Uncollectible
If you don’t qualify for hardship status under your current salary, you can cut back on hours until you fall below the threshold. Be careful with this option—if the IRS can’t garnish your wages, it may try to seize your bank account or other assets. Most importantly, having less income is not going to help your situation.
Change Employers or Temporarily Quit Your Job
Again, this is an option, but not a good one. Some people even quit their jobs or move to another employer to avoid wage garnishment. They assume that the IRS or state will take months to find them. Unfortunately, this is not a great idea. As soon as the IRS realizes that another employer is paying you, the wage garnishment will start up again.
A wage garnishment is one of the IRS’s most serious collection actions. If you have received a final internet to levy or if the wage garnishment has already started, you should get help from a tax professional as soon as possible. Request a free consultation today by calling 1-888-349-2116.