Facing an IRS wage garnishment can be a daunting and stressful experience for taxpayers. However, understanding the process and knowing your rights can help you navigate this situation more effectively. In this comprehensive guide, we’ll discuss 12 essential things you need to know about IRS wage garnishments and the procedures for release.
- What is IRS Wage Garnishment?
IRS wage garnishment, also known as a wage levy, is a legal process through which the IRS collects unpaid taxes by requiring an employer to withhold a portion of an employee’s wages to satisfy the tax debt.
- Legal Basis for Wage Garnishment
The IRS can levy your wages without obtaining a court order, unlike other creditors. Federal law allows the IRS to garnish wages to collect unpaid taxes, penalties, and interest.
- Notice of Intent to Levy
Before initiating wage garnishment, the IRS is required to send a Notice of Intent to Levy to the taxpayer’s last known address. This notice provides information about the taxpayer’s rights and options for resolving the tax debt.
- 30-Day Notice Period
Taxpayers have 30 days from the date of the Notice of Intent to Levy to appeal the proposed wage garnishment or explore alternative payment arrangements with the IRS.
- Exemptions from Wage Garnishment
Certain types of income, such as Social Security benefits, disability payments, and certain types of public assistance, are exempt from IRS wage garnishment.
- Percentage of Wages Garnished
The IRS can garnish a significant portion of your wages, typically up to 25% of your disposable income after accounting for certain deductions, such as taxes and Social Security.
- Financial Hardship
Taxpayers experiencing financial hardship may qualify for a partial or full release of the wage garnishment. The IRS will consider factors such as income, expenses, and assets when evaluating hardship claims.
- Request for Release of Wage Garnishment
To request a release of the wage garnishment, taxpayers must contact the IRS and provide documentation to support their claim of financial hardship or other valid reasons for release.
- Installment Agreement or Offer in Compromise
Taxpayers may be able to avoid or stop wage garnishment by entering into an installment agreement or an Offer in Compromise with the IRS. These arrangements allow taxpayers to pay off their tax debt over time or settle for less than the full amount owed.
- Collection Due Process Hearing
Taxpayers have the right to request a Collection Due Process (CDP) hearing within 30 days of receiving the Notice of Intent to Levy. This allows taxpayers to challenge the proposed garnishment and present evidence in support of their case.
- Bankruptcy
Filing for bankruptcy can temporarily halt wage garnishment proceedings and provide relief for taxpayers facing overwhelming debt. However, the discharge of tax debts through bankruptcy is subject to certain restrictions and eligibility requirements.
- Release of Wage Garnishment
If the IRS determines that the taxpayer qualifies for a release of the wage garnishment, they will notify the employer to stop withholding wages. However, it may take some time for the release to take effect, so taxpayers should continue to monitor their paystubs to ensure compliance.
Conclusion
IRS wage garnishment can have serious financial implications for taxpayers, but knowing your rights and options for release can help you mitigate the impact. If you receive a Notice of Intent to Levy from the IRS, it’s crucial to act promptly and explore available avenues for resolving the tax debt. Whether through financial hardship claims, installment agreements, or other arrangements, there are ways to address IRS wage garnishments and regain control of your finances. Consider seeking assistance from a tax professional or contacting the IRS for guidance on resolving your tax debt and stopping wage garnishment. With the right approach and advocacy, you can navigate the wage garnishment process and achieve a favorable outcome.
