A wage levy is when the IRS takes money directly from your paycheck to cover your unpaid taxes. IRS wage levies can be extremely aggressive, and whenever possible, you should get help from a tax attorney before the IRS levies your wages.
If your wages are currently being levied, contact us at W Tax Group immediately for help.
How Much Money Can the IRS Take From Paychecks?
The IRS leaves delinquent taxpayers a very small amount of money, called the exempt amount. As of 2022, if you’re single with no dependents, the exempt amount is $1079.17 per month, and the IRS takes all earnings over that amount. A married couple with two dependents would get to keep $2891.67 per month, and the IRS levies the rest.
Once a wage levy is in place, any money you earn above the exempt amount can be taken from the IRS. If you receive a bonus, the IRS will take it. If you have two jobs and one job covers the exempt amount, the IRS can take the remaining amount from that job and all of your earnings from your second job.
How Do You Know If the IRS Is Going to Garnish Your Wages?
An IRS wage garnishment shouldn’t be a surprise. Before issuing the garnishment, the IRS will send you a Final Notice of Intent to Levy and Notice of Your Rights to a Hearing at least 30 days before the levy. To ensure you get the notice, the IRS will either give it to you in person, send it to your last registered address as registered mail, or leave it at your place of business.
The IRS will also send you a Third Party Contact Notice alerting you that the agency is going to talk to a third party, in this case, your employer. Then, the IRS will send a Notice of Levy on Wages to your employer, and generally, your employer will start garnishing your wages the next pay period.
What to Expect With a Wage Levy
Your employer will give you a statement to fill out so they can figure out how much to garnish from your wages. You have three days to fill out the form, and if you don’t, your employer will garnish your wages as if you are married filing separately with no dependents.
This means your employer will send all of your earnings over $1079.17 to the IRS — you will have to live on about $280 per week.
Interest and penalties will continue to accrue while the levy is in place. Typically, the IRS will also seize all state and federal tax refunds, and it may also levy other assets such as real estate, personal property, and bank accounts. If you’re self-employed, the IRS can even claim payments from your clients.
How to Avoid a Wage Garnishment
To avoid a wage levy, you need to reach out to the IRS before the levy is in place. The IRS offers many different options to help people take care of their unpaid taxes, including payment plans and offers in compromise. Once a wage levy is in place, setting up another arrangement can be difficult. To get help, you may want to consult with a tax attorney.
How to Remove a Wage Garnishment
The IRS will remove your wage levy in the following situations:
- You pay the unpaid tax in full.
- The collection period expired before the levy was issued.
- You’ve set up an installment plan, and the agreement says the levy can be removed.
- You file for bankruptcy — This will place a stay (hold) on the garnishment while the bankruptcy case is proceeding, but it will not necessarily eliminate your debt.
- The levy is creating economic hardship for you.
To prove economic hardship, you may need to make a full financial disclosure to the IRS, and if the IRS removes your wage garnishment, you still owe the tax.
Will Quitting My Job Stop the Garnishment?
Quitting your job can temporarily pause the wage garnishment. But the IRS will find you at your new employer. If the IRS can’t garnish your wages, it will look for other assets to seize. This is not an effective way to stop a wage garnishment.
Child Support and Wage Garnishments
If you pay child support directly to your child’s other parent, you need to notify the IRS so your employer doesn’t take that amount from your paycheck. In this case, you cannot claim that child as a dependent when calculating your exempt amount.
Get Help With Wage Garnishments
If the IRS has threatened to garnish your wages or if you’re already being garnished, get help today. The tax lawyers at The W Tax Group understand how the IRS works, and we have experience dealing with a wide range of tax problems.
We can negotiate with the IRS on your behalf and help you get the best outcome possible for your situation. Don’t let the IRS take your wages — contact us for help today.