How to Protect Your Income and Stop IRS Wage Garnishment

If the IRS is garnishing your wages for unpaid taxes, there are multiple ways to stop the garnishment, from requesting a payment plan to finding errors within the IRS’s handling of your case. Call Damiens Law at 601-476-1361 to set up a time to meet with our team of tax pros now.

When a taxpayer fails to file or pay their taxes, the IRS can try to recover what they are owed in several different ways. One of the most financially challenging collection methods for many taxpayers is wage garnishment. While any type of asset seizure can have severe financial consequences, losing the majority of your paycheck can put your family in a precarious situation. 

Unfortunately, there is a lot of misleading info about wage garnishments, and we’re here to dive into the truth about them and answer your FAQs about garnishment. Here’s what you need to know. First, we explain how wage garnishment works, and then, we outline how to stop it.

How Much the IRS Can Take

If you have ever had your wages garnished, you may know that most creditors have strict limits regarding what they can take from your paychecks. However, the IRS has far more freedom when it comes to garnishment. They determine how much you need to live on, based on your filing status and number of dependents—and anything over that amount can be garnished. 

The charts are found in Publication 1494 and are updated each year to account for inflation. For example, a married taxpayer who filed jointly with two dependents would be allowed to keep $1507.70 from their biweekly paycheck. A single taxpayer with zero dependents would be allowed to keep $561.54 in the same timeframe. Considering that living costs are at an all-time high, these allowances could cause significant hardships for families of all sizes and means.

What about bonuses? The allowances provided by the IRS are based on the frequency of your pay. Anything earned above and beyond your typical pay—for example, commissions, bonuses, or even wages from a second job—can be seized in their entirety and put toward your tax debt.

Differences between IRS Garnishments and Other Garnishments

Not only does the IRS have a lot more leeway in terms of how much they seize from your paychecks, they also have an easier legal process when it comes to garnishment. Other creditors have to begin a wage garnishment by filing a lawsuit against the party who has fallen behind on payments. The IRS does not need to do so; they simply need to send the appropriate notices, wait the necessary amount of time, and then move forward with garnishment.

What Happens Before Wage Garnishment?

It’s important to recognize that the process of wage garnishment is not immediate. This is generally considered an advanced collection tactic by the IRS—they would rather find another way to address your tax debt and ensure your compliance with tax laws. That’s why they send out multiple notices. Each of these is an opportunity to contact the IRS directly or begin working with a tax professional to handle your tax debt in a way that fits your budget and needs.

Prior to the IRS garnishing your wages, you’ll receive several notices. They will inform you of your past-due taxes, urge you to contact them about payment arrangements, and inform you of their intent to levy. The last notice you receive is a Final Notice of Intent to Levy and Notice of Your Right to a Collection Due Process Hearing. This notice is your sign that your chances have run out. If you do not take immediate action to address your tax debt, the IRS will move forward with wage garnishment.

Timeline

The IRS begins sending notices as soon as they realize that you have not paid your taxes. This depends largely on how much you owe and how quickly they realize that you have fallen behind. While some people may fly under the radar for years, others are caught immediately.

Each notice generally gives you 30 days to respond and make payment arrangements with the IRS. If you do not, they will move forward with the next notice. After they send the Final Notice of Intent to Levy, you have 30 days before they contact your employer to set up wage garnishment. During that 30 days, you should reach out and try to set up payment arrangements. That’s the best way to avoid the garnishment.

How to Stop IRS From Garnishing Wages

The best way to stop the IRS from garnishing wages is to avoid it completely. This is not a situation where you want to wait until the last possible moment to take action and find a solution. Once there is a wage garnishment order in place, it is far harder to stop it and get the IRS to accept another solution. 

Remember, by the time your wages are getting garnished, the IRS has already contacted you multiple times attempting to set up payment arrangements. They only move forward with garnishment if it appears to be the only reasonable way to get what they are owed.

On the other hand, if you contact the IRS as soon as you know there’s an issue, you have the opportunity to consider your options and find the best path forward for your financial situation. There are several, but the options specifically available to you depend on the details of your situation.

Paying Off the Debt

Of course, you could always pay the debt off in full, including all penalties and interest. This settles your debt with the IRS and ensures that they don’t need to take further collection actions. However, if this were an option for people, they likely wouldn’t be at the point of having their wages garnished.

Currently Not Collectible

Those in dire financial straits can often be considered currently not collectible by the IRS. For an individual to be currently not collectible, the IRS must decide that any collection action against them would put them in financial hardship. This means that making any monthly payments or partial payments would leave you in a position where you cannot meet your basic needs.

This is not a permanent solution, so it’s crucial to know what your next steps are. If the Collection Statute Expiration Date (CSED) runs out before you are no longer considered currently not collectible, the IRS will no longer be able to collect from you. But if they review your financial situation prior to this point and decide that you are able to make payments, they will resume collection activity. At that point, you will owe the initial taxes due, plus all of the penalties and interest that accrued while you were currently not collectible.

Offer in Compromise

An offer in compromise is another good option for those with limited financial means. Perhaps you are unable to pay your tax debt in its entirety, but you are able to put some money toward it. If a monthly payment would still be too high for your budget but you do have some room in your budget, an offer in compromise could be the ideal solution. Rather than paying your debt in full, you make a partial payment that accurately reflects your financial means and ability to pay. You make your payment either in one lump sum or over several monthly payments. Then, the IRS writes off the rest.

Because this solution allows you to pay less than what you owe, the IRS will want a thorough look at your finances before they accept your offer. You’ll be asked to provide information regarding income, debts, equity in your assets, monthly bills, and other obligations.

Payment Plan

IRS installment agreements are a popular option for those who cannot pay their tax debt upfront but can fit a monthly payment into their budget. A short-term plan gives you up to 180 days to pay off your tax debt, while a long-term installment agreement allows for up to 72 monthly payments and even longer in some cases. You can save money on setup and application fees by agreeing to a direct debit plan.

If you choose to go this route, make sure that your monthly payment is actually reasonable for your financial situation. Too many people have fallen into the trap of a too-high monthly payment, assuming that they can find ways to make it work. But when an unexpected expense or pay cut hits, they miss a payment and default on their installment agreement. Avoid this outcome by only choosing an installment agreement if it genuinely fits your financial means.

Prove That the IRS Made a Mistake

You may be able to stop IRS garnishments if the IRS did not provide the necessary notice before taking action against you. The IRS is required to follow specific protocols before they initiate collection actions, and when they take action too soon or do not send the appropriate notices, taxpayers may be able to stop the collection actions right away.

How to Stop an In-Progress IRS Wage Garnishment 

Perhaps you missed the window to prevent wage garnishment and you’re now in the position of watching most of your paycheck get sent to the IRS. All is not lost; you may still be able to stop the wage garnishment order and take control of your financial situation.

At this point, you can still look into the options listed above and figure out if they’re a suitable option for your financial situation. There is more of a sense of urgency, though, since the IRS will continue to garnish your wages until you have other payment arrangements underway.

If the garnishment is causing significant financial hardship—which it would for most families—you may be able to request relief from the levy for this reason. The IRS doesn’t want to cause undue hardship for taxpayers; they simply want to collect what they are owed with minimal stress or complications. If you can get your garnishment temporarily halted because of financial hardship, you can then begin working with a tax professional to figure out the best payment option for your needs.

Another option is a levy release. Financial hardship is one way to secure a levy release, but you may also request a levy release if you are near the Collection Statute Expiration Date, have entered an installment agreement, or you can demonstrate that releasing the levy would make it easier for the IRS to collect what they are owed. 

What About Bankruptcy or Switching Jobs?

Many people think that they can get out of garnishment by filing bankruptcy or switching jobs. It’s true that filing bankruptcy will trigger the automatic stay, which stops creditors—including the IRS—from all collection actions. This gives you temporary relief from garnishment while your bankruptcy case goes through bankruptcy court. 

However, there is no guarantee that your tax debt will be discharged in bankruptcy. While some tax debt is dischargeable in bankruptcy, some tax debt is not—and you won’t really know which category yours falls into until you talk to a bankruptcy attorney. If you aren’t truly in a situation where bankruptcy is your only path forward, you could be causing massive damage to your credit and setting your goals back several years when there are other solutions to your tax debt in front of you.

Much like declaring bankruptcy, switching jobs is technically a way to get out of your garnishment—but it’s temporary. The garnishment order only allows the IRS to collect from your current employer. When you switch jobs, there will be a short period of time where the IRS has not yet contacted your new employer and you get to keep your full wages. But know that this is a short-term solution. 

The IRS will be able to track you down fairly quickly thanks to tax documents from your new employer, and then it’s just a matter of time before there’s a new garnishment order in place. Not only will you still eventually end up paying what you owe, but you’ll also have a long string of short job placements on your CV, which could harm your career growth.

Long-Term Solutions Are Better

While these solutions may seem to bring immediate relief from your tax problems, that relief is temporary and will eventually leave you in the same position you started in. Although it’s more work to explore other tax debt solutions, doing so brings actual long-term relief.

When It’s Time to Talk to a Tax Pro

If you’ve received a final notice from the IRS and you’re within your 30-day window to address your tax debt, you are nearly out of time before the IRS garnishes your wages. At this point, talking to a tax pro can help you quickly assess your options, find the best one for your needs, and start the application process. Sorting through the options on your own could take more time than you have, risking garnishment before you’re able to take action.

You should also talk to a tax professional if you are overwhelmed by your tax relief options and you aren’t sure where to start. It’s easy to go with the first solution that presents itself, even if it’s not necessarily the best one. For example, installment agreements are a great option for many taxpayers—but those who live on a tight budget may commit to payments higher than they can truly afford. Then, when they default, they are right back at square one. By working with a tax attorney from the beginning, they can find the best solution and avoid those that may cause further financial hardship.

We also recommend talking to a tax attorney if you are currently being garnished and you are experiencing financial hardship because of it. In this situation, you may be unable to afford to wait weeks or months while the IRS makes a decision regarding your request for a payment plan, offer in compromise, or currently not collectible status. A tax attorney can better assess your current situation, explain your options, and take immediate action.

Get Help Now!

If you’re being garnished right now or facing imminent wage garnishment, you do not have to go through this alone. This is an incredibly stressful time, and the team at Damiens Law is here to help you find a way forward. We want you to experience the relief that comes with handling your tax debt, getting caught up, and taking control of your finances. Reach out online or call us at 601-476-2693 to set up a consultation and to learn how we can help with wage garnishments.