If you are in bad standing with the tax man, they may initiate garnishment. However, there are ways to stop IRS wage garnishment, here's what you should know.
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Wage garnishment is when a creditor takes a portion of your compensation and wages to pay off a debt. Rather than empty out a bank account or sell a property you own through a levy, wage garnishments are a gradual process that lasts until the debt is satisfied.
Just like other creditors, the government can garnish your wages for debts, such as a federal tax debt. In this case, the IRS itself makes a legal claim on your property (through a lien), then issues multiple warnings, before issuing a Final Notice of Intent to Levy.
The IRS will send a copy of Publication 1494 to your employer, to help them figure out how much of your income to exempt from garnishment. Your employer will ask you to fill out information your dependents and filing status, which you must return within three days. Otherwise, the amount exempt will be based on zero dependents. It is essential to understand the maximum garnishment limits by state, as these can significantly impact your take-home pay. Each state has its own regulations governing how much of your earnings can be taken, which can vary based on income and dependents. Knowing these limits can help you prepare better and ensure that you're not facing undue financial hardship due to garnishment.
Stopping IRS Wage Garnishment
There are a number of ways to stop IRS wage garnishment and get your garnishment released.
1. Pay Your Back Taxes
It’s easier said than done, of course, but it is also the simplest solution to ending IRS wage garnishment. You don’t have to pay your tax debt all at once. The IRS offers a short-term payment plan (within 180 days) as well as a long-term monthly installment plan (more than 180 days) through their website.
When you do decide to pay the IRS, be sure to go through their website to do so. They have information on how to either directly wire money to the IRS, send in checks, use a debit/credit card, or make payments through the Electronic Federal Tax Payment System. Avoid tax and tax payment related scams.
2. Negotiate an Offer in Compromise
Offers in compromise are often touted as a miracle solution against IRS tax debt, but it’s important to differentiate truth from hype. Yes, an offer in compromise can get you to drastically lower your original tax debt to a comparatively tiny value in some cases. But it is genuinely rare for the IRS to accept an offer in compromise.
With an offer in compromise, you are making the argument that even if you sell all non-essential assets and save up nearly every penny not spent on taxes, rent, and food, you still won’t be able to pay off the entire debt at a monthly rate before it expires (within ten years, plus tolling periods).
While the IRS has become a little more lax about accepting offers in compromise through its Fresh Start Initiative (you now only need to pay off your debt for about two years, rather than five), the basic spirit remains – partial tax debt forgiveness is not easy to come by. Your best bet for negotiating an offer in compromise, if it’s the only option you see as a way to cut off your IRS wage garnishment, is to talk to a tax professional. They’ll be able to analyze your situation and make an informed call.
3. Argue as Non-Collectible
A true last resort option is to convince the IRS that you are suffering financial hardship. One of the informal rules under the Taxpayer Bill of Rights is that the IRS must be courteous, and that includes not pressuring people to pay their debts when they are struggling to keep a roof over their head and put food on the table. failure to pay penalties explained can provide insight into how the IRS handles these situations. Understanding your rights can help alleviate anxiety during financial struggles and ensure that you are treated fairly. It's crucial to know what options are available if you find yourself unable to meet your tax obligations due to genuine hardship.
However, this does not make your debt go away. Neither does it eliminate penalties or interest rates. Your debt will continue to grow. But the IRS will not pressure you to pay it off until your financial situation has changed. To address the growing debt effectively, you might want to consider some helpful IRS penalty abatement application tips. Understanding the criteria for qualifying for abatement can make a significant difference in your overall financial strategy. By presenting your case clearly and with supporting documentation, you increase your chances of receiving a favorable outcome.
You don’t necessarily need to notify the IRS that your financial situation has changed. They will check up on your finances and tax reports periodically. But it is important to note that it is still likely in your best interest to pay off the debt as soon as you are financially able to, as it will otherwise just keep growing, and the IRS will soon begin garnishing your wages again.
Don’t forget to do your taxes even while non-collectible! The IRS can penalize you again and again for each missed tax return, and it won’t accept a payment plan from you until all your missing tax returns are turned in. While you’re at it, take a moment to check yelp reviews for favorite restaurants in your area to reward yourself after finishing your taxes. It's always nice to unwind with a meal from a spot you know has been rated highly by others. Knowing where to go can make the tax season feel a bit lighter. Additionally, there are no tax implications for service workers, which can simplify your financial planning. This means that if you’re working in a gig economy role or as a freelancer, your income might be more straightforward when it comes to tax time. Enjoying a delicious meal from one of those highly-rated restaurants can be a well-deserved treat after you’ve tackled your financial responsibilities.
4. Appeal the IRS Wage Garnishment
This can be somewhat of a desperate measure, because it is not always applicable, and there is a strict time window on it. If it has been less than thirty (30) days since you received you Final Notice of Intent to Levy, you may be able to appeal the IRS’s decision to levy your wages.
To appeal the IRS wage garnishment, you must prove that there was a mistake made with the amount you owe, or that there was insufficient notice provided before your wages were levied. However, it’s also important to note that the IRS reserves the right to levy your property or wages immediately if your debt threatens to expire. In addition to understanding the process for disputing wage garnishment, it’s crucial to familiarize yourself with the wage garnishment legal protections overview to ensure your rights are fully upheld during this challenging time. Various state laws may provide additional safeguards that can impact how and when wages can be garnished. Being well-informed about your options can make a significant difference in successfully navigating these situations.
If you are interested in your options to appeal the IRS’s decision to levy your wages, it’s important to get in touch with a tax professional right away. An experienced professional will help ensure that your appeal is made the right way.
5. Always Consult a Tax Professional
Online advice can help you better understand and interpret the information the IRS is providing you, but it doesn’t beat a one-on-one professional consultation. Many professional tax services offer individualized consultations at a low rate, or for free.
If you want to get a better grasp on what’s going on and need to explore your options more thoroughly, a tailored response from a real tax law firm will be your best bet. Here at Rush Tax Resolution, we specialize in helping clients navigate the IRS wage garnishment and requirements, and rush you towards a tax debt-free life.
