Can the IRS take your paycheck if you owe late taxes? Unfortunately, the IRS can claim a part of your income through something called an IRS wage garnishment. One of the frustrating features of a wage garnishment is that the IRS will contact your employer directly to have your earnings redirected. Fortunately, the situation isn’t hopeless if you’re proactive about reaching an agreement with the IRS. Many people get into garnishment territory because they’re avoiding the IRS out of fear of penalties after running into tax problems. The reality is that it’s impossible to hide from the IRS. They know how much you owe, which tax years you didn’t file, and all of the personal details needed to track you down. In fact, they will have no trouble finding your employer if they want to get money from you. Avoiding letters from the IRS often just means getting on the fast track to a wage garnishment. This is actually a shame because the IRS only uses wage garnishment as a last resort. If that’s news to you, take a look at the answers to questions that are probably on your mind about the IRS taking your wages.
What Does Garnish Wages Mean?
“Garnishing” your wages means taking a cut until a debt is paid off. A wage garnishment is the legal procedure the IRS uses to take a portion of your earnings by requiring funds to be withheld from each paycheck. Yes, it’s fully legal for the IRS to do this if it is determined that you have neglected your tax obligation. No, the IRS won’t ask nicely for permission to take your money. Your employer must comply when the IRS comes calling to demand that a portion of your paycheck is redirected through IRS Form 668-W.
Will the IRS Notify You If They Garnish Your Wages?
A wage garnishment from the IRS will never come as a surprise. The IRS must first send you a written note detailing the amount you owe using an itemized list of all charges for your tax debt, interest, and penalties. This notice should also include a due date for when the IRS expects your balance to be paid in full. It’s vitally important to contact a tax professional to go over your next step if you receive an IRS Final Notice of Intent to Levy and Notice of Your Right to a Hearing because a garnishment will be just around the corner if you don’t take the right action.
How Much of Your Paycheck Can the IRS Take?
First, it’s important to know that the IRS can’t take everything you make just because a wage garnishment has been issued. The IRS will leave you with something from every paycheck if your wages are garnished. However, a garnishment can still be steep. In fact, the IRS can potentially take your full pay from a single employer if you have more than one income stream. The IRS uses a formula that takes into account your filing status, pay period, and number of dependents when deciding your expected amount per paycheck. It’s not uncommon for the amount taken to be more than half of your pay. What really hurts is that the IRS can take all of a bonus that you are paid during the span of your garnishment. Again, your employer has no choice when it comes to complying with the IRS’s demands.
Can You Negotiate a Wage Garnishment?
The easiest way to fight back against a tax garnishment is to simply pay your tax debt off in full. However, there’s a good chance that you’re in this situation precisely because you lack the assets or borrowing power to do that at the moment. That won’t necessarily mean that you’re stuck with a wage garnishment. The next steps are crucial because you may be able to get a garnishment stopped in its tracks if you can convince the IRS to work with you.
You’ll need to approach a wage garnishment differently depending on how advanced your situation has become. If a garnishment has not yet been issued, you may be able to request a hearing to contest the IRS’s findings. Once you receive the Final Notice of Intent to Levy letter, time is of the essence. You will have just 30 days to request your hearing and petition the tax court.
What if a wage garnishment has already been issued? You’re not stuck if your garnishment is already in place. The IRS may be willing to negotiate a collection alternative with you. Here’s a look at the options that are available to taxpayers who owe money to the IRS:
- Offer in Compromise (OIC).
- Installment Agreement (IA).
- Currently Non-Collectible (CNC)/Hardship Status.
What’s the top thing a delinquent taxpayer should know before pursuing any of these potential relief options? None of these options are on the table if you haven’t filed all past returns. The IRS won’t work with people who are not current with tax returns. What’s more, you’ll be asked to make a commitment to file all future taxes under threat of having your relief plan revoked if you default.
What Happens After a Wage Garnishment Is Paid?
Hopefully, you’ll be able to work with a tax expert to avoid an IRS wage garnishment. However, it’s important to know what to expect if you allow your garnishment to progress. The IRS should notify your employer to stop deducting money from your wages once your debit is paid in full.
A Wage Garnishment Doesn’t Have to Happen
You don’t necessarily have to turn over a big portion of your paycheck just because you owe back taxes to the IRS. In fact, the IRS would prefer not to use this “last resort” option to collect what you owe. This is precisely why IRS tax relief options exist. Getting a tax professional working on your behalf immediately is often the first step to getting on the right course to avoid having your paycheck garnished.
While interrupting a wage garnishment is difficult, it’s not necessarily impossible. Your odds of being able to work out some type of payment plan with the IRS are much higher if you can intervene before the first penny is held back from your paycheck. It’s especially important to get tax help if you believe that the IRS has incorrectly initiated a wage garnishment for a tax debt that you don’t actually owe. Your levy may be stopped if you’re able to prove that your levy is erroneous or the IRS violated the law when issuing your levy.
What should you do if the IRS is trying to garnish your wages. At Tax Group Center, this is something we help our clients solve every day. We’ll help you understand your options for getting a wage garnishment stopped by putting a relief option in its place. If you have unfiled tax returns preventing you from seeking the relief options offered by the IRS, we can start by getting you fully current. Protect your income from the IRS. Call Tax Group Center at (800) 264-1869 to book a consultation today!