Can the IRS Garnish My Wages?

The IRS has many ways of getting taxpayers to pay their debts, and that includes wage garnishment. Wage garnishment is when the IRS instructs your employer to withhold a portion of your income to cover your tax debts. 

Keep reading and learn how much the IRS can take from your paycheck and what you can do to stop it. 

Key Takeaways

• Wage garnishment is when the IRS withholds a portion of your income to cover your tax obligations. 
• The IRS gives you 30 days to appeal wage garnishment after it sends you the Final Notice of Intent to Levy. 
• The IRS isn’t subject to the usual federal wage garnishment laws, meaning the amount taken can be substantial. 
• The IRS must leave you an exempt amount based on your location and filing status, which also includes child support.
• You can stop wage garnishment by appealing, paying off the balance, applying for CNC, or setting up an approved payment plan. 

Understanding IRS Wage Garnishment

IRS wage garnishment is a legal tool employed by the IRS to retrieve outstanding taxes directly from your earnings. The IRS may garnish:

• wages
• salaries
• commissions
• bonuses

Imagine a chunk of your paycheck, instead of coming to you, going straight to the IRS to settle your tax debt. Luckily, wage garnishment will never come to you as a surprise – the IRS must notify you first.

The Initial Signs: Notices Leading to Wage Garnishment

The IRS doesn’t go straight to wage garnishment. It all starts with a paper trail and a couple of urgent notices sent to your last known address. Here are some signs that the IRS is preparing to garnish your wages: 

• You’ve received a demand for payment: Before any garnishment action, the IRS will send you a written notice of the tax debt. This shows the principal tax debt, penalties, and any interest you owe. The notice will also include the due date to pay your balance. This is your chance to talk to a tax attorney and stop the IRS wage garnishment before it starts. In most cases, the IRS will send several payment due notices, but they only need to send one before escalating to the next notice.

• You’ve received a Final Intent to Levy: If you don’t respond to the written notice, the IRS will send you the “Final Notice of Intent to Levy.” Once you receive this notice, you have at least 30 days before the wage garnishment begins. This notice will include a letter informing you of your right to appeal. If you don’t appeal before the end of the 30 days, the IRS has the right to start garnishing your wages. 

Once the IRS is ready to move forward, they’ll send a notice to your employer. Your employer must begin withholding your income within the next payroll cycle after receiving the notice, and this continues until your debt is fully paid. 

How Much Can the IRS Garnish from Your Income?

While the IRS cannot take your entire paycheck, it can still deduct a substantial amount of your income, as it’s not subject to the federal wage garnishment law. The IRS has its formula for calculating the amount to deduct from your paycheck. It’s based on your filing status, standard deduction, and the number of dependents. For a clear overview, check out the IRS exemption table.

To understand how much the IRS can deduct from your income, let’s use the example of Taxpayer A, who is filing as the head of household and has three dependents. Using the table above, the IRS allows Taxpayer A to exempt $726.93 weekly. This means that if they’re earning $1,300 weekly (after required withholdings), they’ll take home $726.93, and their employer will forward the remaining $573.07 ($1,300 – $726.93) to the IRS to pay the tax debt.

Protecting Your Paycheck: Legal Limits on Wage Garnishment

While the IRS has the power to garnish your wages, it can’t take it all. The law protects a portion of your income, ensuring that you retain enough to cover basic living expenses. These legal limits on wage garnishment are a safety net, preventing you from being left empty-handed.

For instance, if you’re paying child support, the IRS allows you to add the child support amount to the exempt amount. Following the above example, if taxpayer A has to pay $300 in child support weekly, they’d be allowed to exempt $1,226.93 ( $726.93 + $300). Note that if you add child support to your exempt amount, you can’t include that dependent when determining the exempt amount. 

For taxpayer A to exempt $1,226.93, it would mean they are living full-time with three dependents and paying for child support for another child living in a different household. If this sounds overwhelming, consult with legal assistance from Damiens Law Firm, PLLC, to ensure accuracy in your specific case.

How to Avoid Wage Garnishment

The IRS has many payment plans and relief options to help struggling taxpayers. The trick is to set up these plans before the agency starts garnishment your wages.

Installment Agreement: Structured Payment Plans

An installment agreement is a structured payment plan that allows you to gradually pay off your tax bill by making regular monthly payments. You can take up to 0 years to pay, but to qualify, you must file all your required tax returns and be up to date on quarterly tax payments. Once you’re approved, the IRS won’t garnish your wages as long as you stay up to date with your payment plan. 

Offer in Compromise (OIC): Negotiating Your Tax Debt

If you’re approved for OIC, you will pay less than you owe, and the IRS will waive the remaining debt. This option works when you can prove that the collection of the full amount can create an economic hardship, there’s no way you’d ever pay the full amount you owe, or there’s doubt about the tax liability accuracy. 

The application involves full financial disclosure and requires an initial payment and application fee.

Currently Not Collectible (CNC) Status

To qualify for CNC, you must prove that paying any amount of your tax debt would prevent you from meeting basic living expenses. If your CNC request is approved, the IRS stops all collection, including wage garnishments. However, the interest and penalties on the tax debt keep accruing. The IRS will also periodically check if your finances have improved to the point where you can pay your tax debt.

Preventing Future Wage Garnishments

IRS wage garnishments are brutal, and they can really disrupt your financial stability. The best thing to do is to stay compliant with tax laws so that you can avoid garnishments. Here are a few steps you can take to protect yourself from future wage garnishments: 

• Pay your estimated taxes on time: If you’re self-employed, you’re required to pay your self-employment taxes in addition to regular income taxes. Failing to pay these taxes can result in penalties or wage garnishment. Set aside money every month and make quarterly payments. 

• Observe the tax return deadlines: Filing your returns in time, even when you don’t have the money to pay taxes, shows you’re trying to stay compliant with the tax laws. 

• Proactively ask for a payment plan: If you can’t pay your taxes in full, set up a payment plan to prevent further collection and protect your income. You can request a payment plan at the same time as you file a return showing a balance due.
• Keep track of your income and taxes: If you’re selected for an audit, detailed records can help you avoid unwanted tax assessments that may lead to collection actions if you don’t pay.

How Damiens Law Firm, PLLC Can Help You

IRS wage garnishment is not a situation anyone wants to find themselves in. However, understanding the process and knowing your options can make a significant difference. If you’ve already received a Final Intent to Levy notice from the IRS, we can help. Here is what we can do for you:

• Handle all IRS communications: We can represent you in IRS communications to reduce the pressure and make the process smoother. 
• Set up payments: If you are unable to pay your tax debt, we can assist you in setting up a payment plan tailored to your financial situation.
• Negotiate with the IRS on tax debts: If you have limited income or assets, we can work with the IRS to settle your debt for less than the amount you owe (Offer in Compromise).
• Appeal the garnishment: We can help you appeal the garnishment after you receive the levy notice or potentially once it’s in progress.
• Offer long-term solutions: We understand prevention is key, so our tax relief professionals can advise you on how to manage your tax obligations going forward. 

Frequently Asked Questions

Here are some of the most common questions about IRS wage garnishment.

Can the IRS garnish wages without warning?

Only in cases where the tax collection is in jeopardy. In most situations, the IRS must give you a 30-day warning and advise you of your right to appeal before garnishing your wages.

Will filing for bankruptcy stop wage garnishment? 

In some cases, filing for bankruptcy can help stop wage garnishments. However, once the bankruptcy is complete, the IRS can resume wage garnishments to collect the debt that wasn’t discharged. 

Can quitting my job stop wage garnishment? 

Quitting or changing employers can slow down the IRS from garnishing your wages. However, the moment they realize you’re receiving pay from a different employer, they’ll still garnish your wages. 

What is IRS wage garnishment?

IRS wage garnishment is a tool used by the IRS to collect unpaid taxes from your income, including wages, salary, commissions, and bonuses. It allows the IRS to deduct a portion of your earnings to satisfy your tax debt.

How do I stop the IRS from garnishing my wages?

You can stop IRS wage garnishment by changing your employment, negotiating an installment plan that stipulates the IRS stop the garnishment, or exploring options like an offer in compromise, financial hardship exemption, appeal, or bankruptcy. 

What is the minimum payment the IRS will accept in a payment plan?

The minimum payment is the amount required to pay off your tax debt by the collection expiration date, and generally, it must be at least $25/month.

At what point will the IRS take your house?

The IRS may consider foreclosing on your home if there’s a federal tax lien and enough equity to cover any superior liens, but it’s not a common practice.

Ready to Deal With Your Wage Garnishment? 

If you don’t meet your tax obligations, the IRS can garnish your wages. Before this happens, the IRS sends you several notices and gives you a chance to respond or dispute. With the help of a professional, you can prevent wage garnishments by applying for an OIC, CNC status, or making payment installments with the IRS. 

The best time to call a tax lawyer was before receiving the wage garnishment notice; the next best time is today. Reach us at 601-476-2693 or schedule a free consultation with us, and let’s get you back on track.