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Key Takeaway of Wage Garnishment

It is very important to understand how wage garnishments work to ensure that you take the right action to avoid or stop the IRS from taking your wages.

It's a complex process, and it's best handled with the help of a tax relief professional.

Fact Sheet: IRS Wage Garnishment

IRS wage garnishment is the legal deduction of money from an employee's salary resulting from unpaid IRS taxes. It is one of the IRSs most aggressive tax collection mechanisms and needs to be taken seriously. Unlike other levies, it has a continuous effect on taxpayer's wages and attaches to future payments until the levy is released. Salaries and wages include bonuses, commissions and other paid fees.

An Overview of Wage Garnishment

The IRS has their own limits for wage garnishment. It bases the amount on your standard deduction amount and how many dependents you have. It is not uncommon for the IRS to garnish 70 percent or more of an employee's wages. This harsh amount is to convince the person to resolve the debt. The IRS will send out several payment notices in the mail and may even call if you owe back taxes. Failure to respond will result in a Notice of Intent to Levy being sent. You have 30 days to respond to this notice. If you don't contact the IRS, they will forward the notice to your employer. Your employer is required to adhere to the garnishment order by the IRS.

The IRS Pre-Qualifier to Stop Wage Garnishment

Once a wage garnishment is in place, there are basically three ways to release it.

  • IRS Wage Garnishment Release – You can obtain an IRS Wage Garnishment Release by paying the back taxes owned or arranging a payment plan with the IRS. Payment plans work well when don't have available funds to pay the tax debt. Depending on the amount of the debt, the IRS may require financial statements to arrange a payment plan.
  • Offer of Compromise – This option works well when you're simply unable to pay back taxes due to a job loss or medical bills. The Offer of Compromise settlement agreement is one where you pay the IRS a smaller amount of what's actually owned and get full release from the tax liability.
  • Financial Hardship – The federal tax code obligates the IRS to leave a sufficient amount for taxpayers to pay for necessities and basic living expenses. You can stop wage garnishment by proving financial hardship through shut-off notices, large family size, mortgage-due statements and bank accounts. If the IRS accepts your proof, wage garnishment will stop immediately.

A Closer Look at IRS Wage Garnishment

Taxpayers may request a Collection Due Process Hearing with the Office of Appeals to review their case. The hearing officer will consider many factors in determining how to proceed, reduce or terminate the garnishment. Considered factors include procedural errors, prior payments, statute of limitations and bankruptcy.

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