When a taxpayer fails to pay taxes and the IRS’ initial efforts to collect the back taxes are unsuccessful, the IRS can take money directly from the taxpayer’s paycheck. This is commonly referred to as wage garnishment, although sometimes it may be called a wage levy. Wage garnishment is one of the more severe methods the IRS can rely on to collect back taxes and it’s not easy to stop, but taxpayers have a few options to consider.
How Wage Garnishment Works
Taking money directly from a taxpayer’s paycheck doesn’t happen overnight. First, the IRS sends a letter to the taxpayer informing them of the tax debt and any interest and penalties that have been imposed. If the taxpayer doesn’t respond to this letter, the IRS will send a second letter warning that if the taxpayer doesn’t take action to pay off the tax debt, the IRS may take steps to garnish the taxpayer’s wages.
The taxpayer then has at least 30 days to respond before wage garnishment will begin. The IRS will start the wage garnishment process by making arrangements with the taxpayer’s employer to force the employer to withhold a certain amount of the taxpayer’s paycheck and send it directly to the IRS. The exact amount garnished will depend on a variety of factors, but the IRS has a chart that gives an idea of what to expect. The chart shows that the law doesn’t restrict how much the IRS can take. Rather, it dictates how much the IRS must leave behind for the taxpayer to meet his or her basic living needs.
Ways to Stop the IRS from Garnishing a Taxpayer’s Wages
The quickest and easiest way to stop the garnishment is to immediately pay off the tax debt. This is easier said than done since the taxpayer will almost never have enough money to pay off the tax debt in full. If the taxpayer did, the garnishment process never would have begun in the first place.
Assuming the taxpayer cannot pay off the entire tax debt quickly, the taxpayer will need to make some other payment arrangement with the IRS. This can include an Offer in Compromise or a tax payment plan.
Outside of actually paying off the tax debt or having the IRS agree not to collect it, there are only a few other options available to the taxpayer to stop the wage garnishment. And several of these methods don’t get rid of the garnishment, but provide the taxpayer a little time before the wage garnishment can begin.
Because the IRS has to make arrangements with the taxpayer’s employer to garnish wages, when a taxpayer switches jobs, the garnishment will momentarily cease until the IRS can make arrangements with the new employer. Switching jobs only provides a temporary reprieve from wage garnishment.
As mentioned above, the IRS is allowed to take as much as it wants, except for a minimum amount which must be left in the paycheck for the taxpayer. This amount is exempt from garnishment. But if a taxpayer works so little that his or her total paycheck is at or below this exempt amount, the IRS won’t be able to garnish wages. However, a taxpayer needs to understand that the IRS may be able to collect the tax debt in other ways.
File for Bankruptcy
This should be an option of last resort for stopping an IRS wage garnishment. Besides the negative effect on the taxpayer’s credit history, the bankruptcy won’t actually discharge the tax debt, but will only momentarily stop the wage garnishment.
When it comes to stopping wage garnishment, there is no quick and easy way out of it. There are some methods that can temporarily stop it, but they’re only delaying the inevitable. To actually get rid of the wage garnishment, the taxpayer should seek the assistance of a tax professional as soon as possible to figure out a way to pay off the tax debt.