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There are few financial emergencies that are more stressful than IRS wage garnishment. Being told just a fraction of your income will go to cover federal taxes is enough to make it hard to pay your rent, pay your bills, or cover your monthly expenses.

An IRS wage garnishment is also known as a wage levy and is a serious IRS collection action, but not necessarily permanent. However, in many instances, taxpayers can prevent or minimize the levy if they act promptly and adhere to the correct procedures.

The information provided in this emergency relief guide describes how IRS wage garnishment works, why it occurs, and the quickest ways to get relief before the situation gets too much to handle.

An IRS wage garnishment is a legal demand issued by the IRS to your employer to withhold a portion of your wages and pay them to the IRS to satisfy the unpaid federal tax debt. The IRS does not usually require a court judgment before imposing a wage levy as many private creditors do.

The IRS will normally engage in a collection process involving several notices and attempts to collect the balance before following through with this action.

The IRS should, in general, require:

1. Estimate tax liability.
2. Send a notice and demand for payment.
3. Notify the debtor of a Final Notice of Intent to Levy.
4. Provide an opportunity for a Collection Due Process (CDP) hearing.
5. Wait the proper legal notice time before issuing the levy.

If they are met and a resolution is not found, the IRS can tell your employer to withhold part of your salary.

The IRS will only use wage levies when they have made repeated attempts to collect the debt.

Common reasons include:

• Unpaid federal income taxes.
• Unfiled tax returns that led to substitute tax returns
• Failure to answer IRS notices
• Failing to make the payments on an installment agreement.
• Not taking previous payment opportunities

The IRS would prefer to have taxpayers cooperate in its efforts to collect taxes, rather than to collect taxes forcefully.

The sooner, the better to avoid a levy.

If you notice any of these warning signs, watch out:

1. Several IRS balance due notices.
2. Collection notices (such as CP504)
3. Final Notice of Intent to Levy
4. Certified IRS correspondence
5. Imposing higher fines and interest rates
6. Provided by the IRS to the employer.

Don’t overlook mail from the IRS. All notices include significant deadlines that may help keep your appeal rights alive.

When you see your paychecks are about to be garnished (or have already been garnished), your time is valuable.

1. Read all IRS Notices carefully

Determine:

• The amount owed
• Tax years involved
• Response deadlines
• Appeal rights
• Address of the IRS office designated to handle this case

The details can narrow down the choices of relief options.

2. Call the IRS ASAP

A lot of taxpayers don’t call because they don’t want to talk to the person.

In truth, as soon as they communicate, they are showing good faith cooperation.

Have available:

• Social Security Number
• Tax notices
• Recent tax returns
• Income information
• Monthly expenses
• Bank account details

Preparation brings the discussion to a swift pace.

3. Verify the Debt

Review whether:

• The balance amount is correct.
• Payments were correctly posted.
• Penalties were correctly assessed.
• Processed returns were accurate.

There can be mistakes from time to time, and they need to be resolved right away.

There are a number of options that can lead to a levy release.

Pay the remaining balance.

Option 1: Pay the Balance in Full

This is the quickest solution if financially possible.

Payment may include:

1. Electronic transfer
2. Certified funds
3. Wire transfer
4. Credit or Debit Card
5. Approved financing

The IRS usually removes the levy after the liability is paid off.

Option 2: Establish an Installment Agreement

If it is not possible to pay in full, asking for a payment plan could prevent collection activity.

Benefits include:

• Predictable monthly payments
• Reduced collection pressure
• Potential levy release
• Better long-term compliance

The IRS wants taxpayers to keep up on their tax bill payments as they pay in installments.

Option 3: Request Currently Not Collectible Status

The IRS will consider your account to be Currently Not Collectible (CNC) if paying any amount would cause undue financial hardship.

Factors considered include:

• Income
• Living expenses
• Assets
• Medical costs
• Employment status

Penalties and interest typically continue to accrue, but collection efforts may be suspended.

Option 4: Make an Offer in Compromise

There are certain taxpayers who can get tax debt settled for less than the amount of debt.

Qualification depends upon:

• Ability to pay
• Income
• Expenses
• Equity in assets
• Future earning potential

While filing an Offer in Compromise doesn’t necessarily halt collection in all cases, it can give you more relief if the IRS accepts the offer.

If you get a Final Notice of Intent to Levy, you may have the option of asking for a Collection Due Process hearing before the levy is put in place.

Possible benefits include:

1. Independent review
2. Alternative payment discussions
3. Challenge to collection procedures.
4. A temporary suspension of collection during the appeal is allowed.

When the appeal period expires, protections are likely to be significantly reduced.

Taxpayers may find that a wage levy will not provide them with the money needed to pay for their necessities.

Examples include:

• Rent or mortgage
• Utilities
• Food
• Necessary transportation
• Medical care
• Child support obligations

Being well documented will increase the chances of relief.

Helpful documentation includes:

• Pay stubs
• Utility bills
• Lease agreements
• Medical invoices
• Insurance premiums
• Bank statements

There are times you have to ask for emergency help, and organization is important.

Employers are required to pay an IRS wage levy, in most cases.

The employer is required to:

1. Calculate exempt wages
2. Deduct the amount that is needed.
3. Pay the IRS by mail.
4. Do not release until further notice.

Your employer is not allowed to ignore the levy.

Yes.

The IRS will often assist taxpayers who:

• Respond promptly
• Complete all necessary returns.
• Provide requested financial information
• Make realistic payment proposals
• Remain compliant going forward

Communication is often more effective than giving the IRS a pass.

But many taxpayers end up making things worse for themselves.

Avoid these errors:

• Ignoring IRS notices
• Missing response deadlines
• Giving false financial information
• Not filing up-to-date tax returns
• Failure to fulfill the payment conditions
• Expecting the levy to go away by itself

These usually result in more options when acted upon quickly.

The automatic stay in bankruptcy can prevent some actions by the IRS for at least the duration of the bankruptcy.

However:

1. Not all tax debts will be discharged.
2. There are many recent tax liabilities that stay collectible.
3. The rules of bankruptcy are quite complex.

Bankruptcy is not the best tax remedy, and legal guidance is strongly advised.

The first step in the prevention of another levy is long-term tax compliance.

Consider these practices:

1. Submit all tax returns promptly.
2. Make payroll adjustments as needed.
3. Make estimated tax payments as necessary.
4. Open IRS letters right away.
5. Make copies of all tax records.
6. Keep a close watch on your IRS account from time to time.
7. Change address with IRS when moving.

Simple preventive measures can prevent large collection issues in the future.

Some tax debt is too large and complex for a taxpayer to handle on his or her own; and/or

• There is a big difference between the amounts.
• Some taxes have not been filed for in several years.
• There is an unpaid business payroll tax.
• Appeals become necessary.
• An Offer in Compromise is being prepared.
• Financial hardship documentation is comprehensive.
• The IRS disagrees with your proposed resolution.

A seasoned tax expert can discuss options, interact directly with the IRS, and assist in making sure all essential paperwork is in order.

An IRS wage garnishment can be a daunting occurrence, but there are usually solutions. The best decision may be to pay the balance, enter a payment plan, apply for Currently Not Collectible status, or try another collection option, but the most crucial thing is that you need to take action ASAP. Many times avoiding IRS notices will severely restrict your options, and timely communication can reduce further financial hardships.

If wages are already being taken, collect your records, read through each IRS notice thoroughly, and make contact with the IRS as soon as possible. When it gets complicated, or the debt is large, it may be wise to hire a tax professional to help you.

Many taxpayers can successfully thwart wage levies, improve their financial situation, and get on with their lives, with a realistic and timely resolution strategy and proper documentation, while still meeting any future federal tax requirements.

Yes. If you pay the tax debt, enter an approved installment agreement, you have Currently Not Collectible (CNC) status, or you can prove that you are having significant financial hardship, then the IRS wage garnishment can be cancelled.

There is a basic amount of wages that you can claim as income, depending on your filing status and dependents. The balance that is left can be imposed until the debt is satisfied or the IRS issues the wage levy.

Carefully read the notice and record the response date, tax balance, and contact the IRS early. Prompt action may be necessary to make an appeal or to set up payment alternatives prior to the levy.

In many cases, yes. The IRS may lift or withhold a wage levy if it approves your installment agreement and you continue to meet the terms and conditions of the agreement. Approval is subject to your financial situation and payment history.

For those with a large debt, many years of unpaid taxes, or who are seeking hardship relief and/or an Offer in Compromise, the assistance of a competent tax expert can be an invaluable tool for working through the process and enhancing the odds of a successful outcome.