An IRS wage garnishment is the last thing we want to happen to our hard-earned paychecks. But the IRS has the right to notify your employer of your delinquent tax debt. They can also direct them to withhold some of your earnings. Due to this capability, the best way to avoid a wage garnishment is to get ahead of it. Settle your debt with the IRS before a wage garnishment is used to collect it. If you face a garnishment nonetheless, Tax Champions can help. First, let’s discuss the ins and outs of an IRS wage garnishment.
When does the IRS Issue a Wage Garnishment?
The IRS takes specific steps before issuing a wage garnishment. First of all, the IRS must assess your fair share of tax for the year. Next, they must notify you of the assessment. This is accomplished by sending a notice called A Notice and Demand for Payment. The notice explains the amount of tax debt owed and also includes a due date. The due date is about 10 days after the notice is produced.
If you don’t respond to the notice, a revenue agent at the IRS will examine the financial records they have on your case. This helps him or her determine the most efficient method of collection available. This can include a levy on your bank accounts, a lien on your property, or a wage garnishment. It’s certainly common for a wage levy to be the least intrusive on the IRS’s resources.
How a Wage Garnishment Works
The IRS often determines that the best way to collect back-tax debt is to issue a wage garnishment. In these cases, they send a final notice by U.S. Mail. The IRS conducts most of their business in writing via the U.S. Mail.
Be extremely cautious if you get a phone call from someone claiming to be the IRS. Many criminals have been conducting scams by phone with false claims. Scammers use a popular false claim: you owe back-tax debt and payment is only accepted in the form of gift cards. First of all, the IRS doesn’t accept payment directly. Furthermore, they certainly don’t limit their payment methods to gift cards. In contrast, tax payments in the form of cash, check and credit card go to the U.S. Treasury. Finally and above all, don’t give callers claiming to be the IRS your social security number or any other sensitive identifying information.
The final collection notice is called the Final Notice of Intent to Levy and Notice of Right to a Hearing. This notice is sent at least 30 days before your employer is notified of your standing with the IRS.
What Happens When Your Employer Receives a Wage Garnishment Demand from the IRS?
An employer is required to withhold wages within 10 days of the date on the notice received from the IRS. Littler is a publication that focuses on labor and employment laws. Hence, they offer the following outline of the steps that should be taken by your employer:
- Immediately give the taxpayer/employee parts 2, 3, 4 and 5 of the wage levy.
- Instruct the employee to sign and return the Statement of Exemptions and Filing Status, and return parts 3 and 4 to the employer within 3 workdays. *
*The IRS points out, “If you do not return the statement in three days, your exempt amount is figured as if you are married filing separately with no dependents (zero).
- Based on the Statement of Exemptions and Filing Status executed by the employee, the employer must take the employee’s net pay minus the exemptions and send it to the IRS along with Part 3 of the wage levy for the next payroll period.
- If the amount is not [enough] to satisfy the entire wage levy, the employer must continue to comply with the wage levy until satisfied or until the IRS notifies the employer that it may cease compliance.
- Exemptions must be calculated in accordance with the IRS Publication 1494 as discussed below.
- It is generally a violation of federal and state laws for employers to take adverse action, such as terminating an employee, because of a wage levy (or any other garnishment for indebtedness.)
Releasing an IRS Wage Garnishment
The wage garnishment isn’t a permanent arrangement. Although, it will stay in place until the debt is paid in full or other arrangements for payment are made. The IRS notes several cases in which the levy can, and should be released.
- You’ve already paid the amount you owe.
- The statute of limitations for collection has expired.
- Releasing the levy will help you pay your back-tax debt.
- You agree to a payment plan that calls for the release of the levy.
- The levy makes it too difficult to meet basic living expenses.
The IRS also takes care to point out that the release of a levy doesn’t mean you’re no longer responsible for paying your tax debt. It only means that the IRS has decided not to use that method of collection in your case.
Rest assured that if you lose your job because of an IRS wage garnishment, there are consequences for the employer. They may be fined up to $1,000, imprisoned for up to one year, or both. If you experience a job loss due to the issuing of a wage garnishment, it should be reported to the Department of Labor. The Department of Labor conducts an investigation and decides if the employer violated the law.
Appealing an IRS Wage Garnishment
Taxpayers must take action quickly upon learning of a wage garnishment. The notice of intent to levy your wages comes after previous attempts to reach you go unanswered. Time is limited because the IRS is already taking collection action.
Although you have 30 days to request an appeal, it’s certainly advisable to file the request as soon as possible. Only certain cases are suitable for an appeal. For example, taxpayers who have already paid their debt in full, but are being garnished should file an appeal.
Likewise, you should file an appeal if the statute of limitations has expired, you’re in the process of bankruptcy, you qualify for innocent spouse protection, you haven’t had the chance to appeal the debt, or an error was made when the tax was assessed.
Use IRS Form 12153 to request a Collection Due Process or Equivalent Hearing. This is the process for an appeal. Be sure to mail this form to the IRS. They won’t accept an email or facsimile of the form. If you don’t agree with the decision made on the appeal request, you still have some recourse. You may dispute the decision within 30 days of the date on the appeal decision.
IRS Wage Garnishment and Financial Hardship
You may also express financial hardship, also known as severe economic hardship. Should you choose this route, collect supporting documents that illustrate your monthly living expenses. Above all, include your mortgage note or rental agreement, recent copies of utility bills, medical bills and other necessities for your or your dependents’ needs.
As mentioned above, you’re still responsible for the debt, but the IRS may consider allowing other payment options. Obtaining a suspension of your wage garnishment for financial hardship isn’t easy. Therefore, be sure that you’re confident in your case before sending your forms to the IRS.
Getting Help with an IRS Wage Garnishment
Make no mistake about it; the IRS is hyper-focused on obtaining payment for back-tax debt. In fact, they aim to get as much as possible from you, in the shortest period of time they can manage. Hence, many experts recommend hiring a tax adviser to help you complete the process in your favor.
Tax Champions has been serving clients in danger of a wage garnishment for over 35 years. As a result, we have a keen understanding of the stress a wage garnishment can bring to a struggling taxpayer. We’ll take over communications with the IRS to protect you from unwittingly making statements that work against you. We’ll work diligently to get you out from under a wage garnishment.
Since you’re still responsible for the back-tax debt, we’ll also negotiate a payment arrangement that you can afford. We’ll help you get back into good-standing with the IRS.
We invite you to review our A+ rating at the Better Business Bureau. We have no complaints with them, the Board of Accountancy nor the IRS.
We’re available during standard business hours, as well as evening hours, seven days a week for your convenience. We’ll happily conduct a free case review with no obligation to hire our firm. Our year-round, full-service staff is available to get started immediately, should you choose to hire us.
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 5.11.5 Levy on Wages, Salary, and Other Income | Internal Revenue Service. (2018, March 14). Retrieved from //www.irs.gov/irm/part5/irm_05-011-005
 How Do I Get a Levy Released | Internal Revenue Service. (2019, March 14). Retrieved from //www.irs.gov/businesses/small-businesses-self-employed/how-do-i-get-a-levy-released
 Information About Wage Levies. (2018, August 22). Retrieved from //www.irs.gov/businesses/small-businesses-self-employed/information-about-wage-levies
 Levy. (2019, February 20). Retrieved from //www.irs.gov/businesses/small-businesses-self-employed/levy
 MacDonnell, G. S., & Weissman, W. H. (2017, July 10). An Employer’s Guide for Responding to an IRS Wage Levy. Retrieved June 14, 2019, from //www.littler.com/publication-press/publication/employers-guide-responding-irs-wage-levy
 Richard, L. (2017, November 21). Employer Responsibilities with IRS Garnishment. Retrieved from //smallbusiness.chron.com/employer-responsibilities-irs-garnishment-43676.html
 Tax Champions | Better Business Bureau® Profile. (n.d.). Retrieved June 14, 2019, from //www.bbb.org/us/ca/ventura/profile/tax-consultant/taxchampions-1236-92012281