Learn What You Can Do If the IRS Is Garnishing Your Wages for Back Taxes
The IRS has the right to garnish your wages if you have unpaid taxes. Also called wage levies, IRS wage garnishments take all of your income except a very small amount for necessary living expenses. Wage garnishments can strangle your personal finances and make it hard to enjoy your life.
Luckily, there are ways to get the IRS to release your wage garnishment. Keep reading to learn how to get a wage levy released. Or to get help now, contact us today. The tax attorneys at The W Tax Group can help you stop the wage garnishment and resolve your unpaid taxes.
How to Get the IRS to Release a Wage Garnishment
There are a few different ways to get the IRS to release a wage garnishment. If the IRS is garnishing your wages, you can use the following options to get the garnishment to stop. You can also use many of these options to prevent a wage levy from taking place.
1. Pay the Tax Bill in Full
The IRS will immediately stop the wage garnishment if you pay your tax bill in full. You need to pay the tax you owe plus any interest and penalties that have accrued on the account.
2. Explain the Garnishment Is Causing Economic Hardship
If you can prove that the wage garnishment is causing economic hardship, the IRS will release the wage levy. Economic hardship means that the garnishment is preventing you from meeting basic living expenses.
You can simply call the IRS and explain that the wage garnishment is causing immediate economic hardship. Or you can apply for currently not collectible (CNC) status. When the IRS marks your account as CNC, it temporarily stops all collection actions against you. Then, the agency revisits your account every year or two. If your financial situation improves, collection actions resume.
3. Establish That the Period for Collection Ended Before the Wage Levy
The IRS generally has 10 years to collect unpaid taxes. The 10-year period starts on the latter of the day the taxes were due or the return was filed. The date it ends is called the collection statute expiration date (CSED). If the wage levy started after the CSED, it is not valid. The IRS must immediately release the wage levy if the collection statute has expired.
4. Prove That Releasing the Garnishment Will Help You Pay Your Taxes
The IRS will release a levy if doing so will help you pay your taxes. Generally, this applies to property levies more than wage garnishments. For instance, if the IRS is levying your property but you can take a loan against it to pay off your taxes, the IRS will release the levy so you can get the loan. Although this is relatively rare for wage garnishments, you can get the garnishment released if you establish that it’s preventing you from paying your taxes.
5. Set up an Installment Agreement
An IRS installment agreement lets you pay off your back taxes in monthly payments. In most cases, when you set up an installment agreement, the IRS will stop the wage levy. The IRS also stops levies while your installment agreement request is pending.
6. Prove That the Levy Was Against Exempt Wages
The IRS must immediately release levies against property that is exempt from seizure. With a wage garnishment, this rule applies if exempt wages have been garnished. Exempt wages refer to the amount that the IRS allows you to keep to cover basic living expenses. The IRS uses Publication 1494 to calculate exempt wages based on your filing status, number of dependents, and how often you’re paid.
For instance, if you file your return as married filing jointly, you have two dependents, and you’re paid monthly, $2891.67 of your wages are exempt from garnishment. If the IRS is garnishing this exempt amount, you can get the levy released. Note, however, that before your employer starts garnishing your wages, they will give you a form to fill out so they can calculate the exempt amount. If you don’t return the form on time, your employer will calculate the exempt amount as if you have no dependents and filing married separately.
Additionally, if the IRS is levying wages that you need to pay court-ordered child support, the IRS will also release that portion of your wages from the levy. The court must have ordered the child support before the levy was received by your employer. If you’re exempting some of your wages for child support, you can’t use that same child as a dependent when calculating your exempt income amount.
7. File for Bankruptcy
When you file for bankruptcy, the courts issue an automatic stay. This prevents your creditors including the IRS from pursuing collection actions against you, and by extension, the IRS must stop the wage levy.
Unfortunately, however, bankruptcy does not immediately erase your tax debt. Only certain taxes can be discharged in bankruptcy. Generally, bankruptcy will only discharge income taxes that are at least three years old. If any tax liability is left after the bankruptcy, the IRS can start collection actions again including wage garnishments.
8. Quit Your Job
If you quit your job, there won’t be any wages for the IRS to garnish. Theoretically, you could quit your job and wait for the collection statute to expire. However, if you do this, the IRS may pursue other collection actions such as levying bank accounts or property.
9. Change Employers
Changing jobs will give you a short break from the wage levy. But the IRS will learn who your new employer is fairly quickly, and the agency will send them instructions to start levying your wages.
How Will Your Employer Know If the Wage Levy Has Been Released?
If you pay off your tax bill in full or get a wage levy released for any other reason, the IRS will notify your employer. The IRS will issue Form 668-D (Release of Levy/Release of Property from Levy). Employers are required to comply with wage garnishments. You can’t just tell your employer that the levy has been released. They can only stop garnishing your wages when they receive this notice from the IRS.
How to Appeal a Wage Levy Release Rejection
If you ask to have a wage levy released and the IRS rejects your request, you have the right to appeal. You can appeal before or after the wage levy starts. If you appeal after the wage garnishment is in place, you can also request to have the levied wages returned to you. If the IRS rejects that request, you also have the right to appeal.
To appeal under the Collection Appeals Program, start by requesting a manager conference. With property levies, you must appeal within 10 days of receiving the Notice of Seizure, but with wage levies, there is no deadline.
Alternatively, you can appeal by requesting a Collection Due Process (CDP) hearing. You must request the CDP hearing within 30 days of the date you receive the Notice of Intent to Levy and Notice of Your Right to a Hearing. If you disagree with the decision from the CDP hearing, you have 30 days to appeal to the Tax Court.
Will the IRS Return Levied Wages?
In some cases, you may be able to get the IRS to return wages that have been garnished. This generally only happens if the garnishment was made in error, or if the IRS didn’t follow the correct procedures when setting up the wage levy. Here are the situations where the IRS will return levied wages:
- The seizure was premature — Generally, the IRS can only start garnishing wages 30 days after you have received the Final Notice of Intent to Levy and Notice of Your Right to a Hearing.
- The wage garnishment violated the law — If the IRS didn’t follow the law when setting up the garnishment, you may be able to get your garnished wages back.
- The IRS didn’t follow procedures — The IRS must send you the correct notices, advise you of your right to an appeals hearing, and give you 30 days from the final notice before starting the garnishment. If the IRS didn’t follow these procedures correctly, you may be able to get your garnished wages returned to you.
- Returning the garnished wages will help the IRS collect your tax debt — This usually only applies to levied property, but if you can prove that it applies to your garnished wages, the IRS may return them.
- You set up an installment agreement and its terms allow the IRS to return garnished wages — In some cases, installment agreements allow the IRS to return previously levied property. Again, this typically only applies to physical property, rather than levied wages.
- Returning the garnished wages is in your best interest and the government’s best interest — again, this typically only applies to levied property. But if you can establish that returning the garnished wages is in the best interest of both you and the IRS, the agency may return your wages.
If you want the IRS to return your garnished wages or any other levied property, you must make the request within nine months after the wages were seized.
How Long Does a Wage Garnishment Take?
If the IRS garnishes your wages for unpaid taxes, the garnishment will continue until the tax liability is completely paid off or until you get the IRS to release the garnishment.
At least 30 days before garnishing your wages or seizing any other property, the IRS must send you a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. The IRS doesn’t have to give you 30 days if the IRS believes that collection of the tax is in jeopardy or if a Disqualified Employment Tax Levy (DETL) has been served. A DETL applies if you have unpaid employment taxes and you’ve requested a CDP hearing on employment taxes in the last two years.
In these situations, the IRS can start the wage levy without giving you the 30-day notice. After starting the wage levy, the IRS will send you a letter explaining your appeal rights.
What Types of Wages Can the IRS Garnish?
The IRS can garnish your wages, salaries, commissions, and similar types of payments. It can also garnish payments on dividends and payments on promissory notes. The levy only applies to payments due as of the date of the levy. For instance, if you get paid the day before the levy starts, those wages will not be garnished.
The wage garnishment applies to all wages over the exempt amount. For instance, if you have two jobs and the wage from one job covers the exempt amount, the IRS can garnish 100% of your wages from the other job. If the exemption has already been covered and your boss issues you a bonus, the IRS can take 100% of the bonus.
How Does the IRS Garnish Wages if you’re Self-Employed?
If you’re self-employed, the IRS cannot garnish your wages, but it can issue a third-party levy to your clients. If this happens, your clients will be required to send your payments to the IRS. This is likely to damage your professional reputation. You can get a self-employment wage levy released in the same way as a traditional wage garnishment.
Get Help with Wage Levy Release
Getting a wage levy released can be a tricky process. You need to understand how to negotiate with the IRS. We can help. We are extremely experienced in helping people deal with wage garnishments and other IRS collection actions.
When you contact us, we will start with a free case evaluation. You’ll let us know what’s happening, and we’ll outline some of your options. Then, we’ll help you get the wage levy released and set up a resolution plan for your tax liability. Ready to stop the IRS from garnishing your wages? Then, contact us at The W Tax Group today.