If you’re at risk of having your wages garnished or your wages are already being garnished, there are multiple ways to stop the garnishment. You could explore resolution actions such as setting up a payment plan, requesting a Collection Due Process (CDP) hearing, disputing the tax debt, or paying up what you owe.
At Victory Tax Lawyers, we’re a team of seasoned tax attorneys dedicated to helping people find working solutions to their IRS problems. We specialize in tax relief and offer strategies tailored to your unique financial situation. Our wage garnishment lawyers can walk you through every step of the process, helping you stop the garnishment and regain control of your income. Contact us today for a free tax attorney consultation.
In this article, we’ve taken the time to cover in detail the questions you may have about garnishments, how they work, and the different strategies you can use to stop your wages from being garnished.
What Is IRS Wage Garnishment?
A wage garnishment, also known as a tax levy or wage lien, is a legal procedure in which the IRS seizes a taxpayer’s income to collect their tax debt. With a wage garnishment, all or part of your income will go directly from your employer to the IRS until the debt is satisfied.
IRS wage garnishment differs from traditional garnishments in many ways. For instance, a creditor has to obtain a court order before garnishing your wages. In contrast, the IRS doesn’t need the court’s approval to collect unpaid taxes directly from taxpayers’ paychecks to satisfy their tax debts. Also, while traditional creditors typically have a limit on how much of your income they can garnish, the IRS generally has more freedom to withhold a significant portion of it.
It’s not restricted to your paycheck alone. An IRS levy grants the IRS the right to legal seizure of your personal and other property to satisfy your back debt. This means the agency can choose to garnish wages, take money from your bank or other financial account, and seize and sell your vehicles, real estate, and other personal property. Wage garnishment typically occurs only after other methods of debt collection fail. The IRS resorts to this after the taxpayer has ignored following up on their tax payments, even after multiple warnings.
How to Tell if the IRS Might Garnish Your Wages
As previously noted, the IRS doesn’t just garnish wages without first issuing a warning. In reality, they send several notices before ever taking any action, with each notice escalating the situation. These notices usually inform you of their intent to levy and provide you a summary of the amount you owe, any pending interest and penalties, and a due date to pay off your balance. You’d have to ignore all their notices before the agency would start garnishing.
If you’ve received one or more of the following letters, wage garnishment may be imminent:
- CP14 – First notice of a balance due
- CP501 – Reminder that you still owe taxes
- CP503 – Second reminder notice
- CP504 – Final notice before enforcement (may include intent to levy assets)
- LT11 – Final Notice of Intent to Levy and Notice of Your Right to a Hearing
The LT11 Notice is especially critical as it signals the IRS’s final warning before taking enforcement action. If you’ve received this, it means the IRS intends to garnish your wages, seize your property, or levy your bank accounts. This letter also includes your right to appeal through a Collection Due Process (CDP) hearing. However, you must file your appeal request within 30 days of receiving the letter, or the IRS will go ahead and garnish your wages. If you fail to respond within 30 days, the IRS will issue Form 688-W to your employer, and once this happens, the garnishment of wages begins.
Here’s a rough timeline of how things typically unfold:
- You file a return (or don’t), and a balance is due
- The IRS sends a CP14 notice
- If unpaid, follow-up notices (CP501, CP503, CP504) are sent
- You receive LT11 or Letter 1058 (Final Notice of Intent to Levy)
- You have 30 days to pay or file an appeal
- If you do not respond, garnishment begins
How Much of Your Wages Can Be Garnished
When it comes to wage garnishment, federal law places strict limits on how much a typical creditor can take. Typically, creditors are allowed to garnish the lower of two amounts: 25% of your disposable income or the amount by which your weekly wages exceed 30 times the federal minimum wage.
However, these limits don’t apply when it comes to the IRS, as it has more power than other creditors and therefore isn’t subject to federal garnishment limits like private creditors. In fact, it lies in their discretion to withhold the amount they want from your paycheck directly. In addition, the IRS doesn’t need a court order to garnish your wages, unlike most other creditors. All they need to do is simply send a notice, wait for the allowed timeframe, and then move forward with their plans.
Instead of using a flat percentage like most creditors, the IRS calculates wage garnishment based on your filing status, number of dependents, and the standard deduction. The IRS determines how much to withhold by calculating the minimum amount it believes you need to cover basic living expenses, based on your filing status and number of dependents. Any remaining income beyond that threshold may be subject to garnishment. This threshold is outlined in IRS Publication 1494, which provides guidelines to help employers determine how much of your income should be exempt from garnishment. Here’s a simple table showing how filing status affects that amount:
| Filing Status | Impact on Garnishment |
|---|---|
| Single / Married Filing Separately | Least exempt income (IRS can take more) |
| Head of Household | More exempt income |
| Married Filing Jointly | Most exempt income (IRS can take less) |
Based on Publication 1494, a married taxpayer filing jointly, paid bi-weekly, and claiming two dependents would be allowed to keep $1,546.15 from each paycheck. In contrast, a single taxpayer with the same number of dependents would only be allowed to keep $969.22. This illustrates that two individuals earning the same salary can be garnished very differently depending on their filing status.
The IRS isn’t only allowed to garnish your wages beyond typical creditor limits; it may also garnish bonuses, wages from a second job, commissions, and any other income earned outside and above your typical take-home pay.
How Can You Stop the IRS From Garnishing Your Wages?
Fortunately, if your wages have been garnished, there are actions you can take to pause or completely stop the garnishment. We’ve listed some of the most effective strategies you can pursue if you’re facing IRS wage garnishment:
Pay the Debt in Full
The quickest way to stop the IRS from garnishing your wages is to pay your debt in full. Once the IRS receives full payment, it’ll lift the wage levy. If your financial situation is dire, paying off the debt may not be an option. But, if your financial situation allows it, consider doing so as it will spare you considerable paperwork and stress straightaway.
Set Up an Installment Agreement
If you cannot pay your debt in full due to financial hardship, the IRS offers other solutions. An installment agreement with the IRS lets you pay off your balance over time, making monthly payments until your debt is fully paid.
An installment agreement is arranged so that the IRS can automatically deduct your monthly payments from your bank account. This way, there are lower chances of defaulting or forgetting to make a payment. However, to use this option, you’ll need to prove to the IRS that you’re unable to pay your tax debt at once. If the IRS agrees to the plan, they’ll stop their attempt to garnish your wages.
Request Currently Not Collectible (CNC) Status
This is one of the many tax relief options under the IRS hardship program. If you’re experiencing serious financial hardships, you may be eligible to file for a Currently Not Collectible (CNC) status. This notifies the IRS that you can’t pay anything toward your debt right now. If it’s approved, the IRS will pause all collection actions – including wage garnishments.
Keep in mind that the CNC status is only a temporary relief. Once your financial situation improves, collection activities may resume. Moreover, the CNC status does not eliminate your need to resolve your back taxes as quickly as you can because while the IRS may put a pause on collection actions, interest and penalties are not affected and so will continue to accrue during this period.
Apply for an Offer in Compromise (OIC)
If you qualify, the IRS may agree to settle your tax debt for less than the full amount through an Offer in Compromise (OIC). While an OIC helps you reduce your tax liability relative to your current financial situation, the requirements for approval are stringent. Understanding and keeping these requirements will significantly improve your chances of getting your application approved.
The IRS primarily evaluates OIC applications based on three primary reasons: doubt as to collectability, doubt as to liability, or effective administration. You’ll also need to prove you’re undergoing financial hardship and can’t afford to pay your tax debt in full. To apply for an OIC, you need to fill out and submit Form 656 or Form 656-L, depending on the reason you’re applying, together with other supporting documents.
Your success with this IRS program highly depends on your ability to provide detailed documentation to support your position and keen negotiation skills, which is why it’s often best to hire a professional tax lawyer to handle the process instead.
File for Innocent Spouse Relief
If you owe extra taxes because your spouse has underreported income on your joint tax return, you may qualify for Innocent Spouse Relief. Any IRS collection procedures will stop once this claim is filed. To qualify for Innocent Spouse Relief, you must:
- File a joint return with your spouse
- Live in a community property state,
- Owe additional taxes and penalties due to your spouse’s actions, and
- Demonstrate that you were unaware of the errors.
If you’re eligible for it, you can request relief by filing Form 8857
Request a Collection Due Process (CDP) Hearing
If you believe that the IRS has made a mistake by sending you an intent to levy your wages, you can appeal by requesting a Collection Due Process (CDP) hearing. This appeal must be made within 30 days of receiving a notice. CDP hearing allows you an opportunity to discuss alternatives to the enforced collection, such as installment plans, offers in compromise, and other arrangements.
File for Bankruptcy (as a Last Resort)
As a last resort, you can file for bankruptcy, which could discharge your tax debt. Although bankruptcy can only clear dischargeable tax debts, it can be beneficial in stopping the IRS from garnishing your wages. Once a bankruptcy case is on, an IRS wage garnishment or levy is temporarily halted due to the “automatic stay.”
The problem with this option, though, is that there is no guarantee that your tax debt will be discharged once you file for bankruptcy, as not all tax debts qualify to be discharged, and you wouldn’t know which category your debt falls under unless you’re working with a tax attorney.
Moreover, filing for bankruptcy has long-term risks and impacts. For instance, it can negatively impact your credit, leaving you unable to purchase a home or a car or to get a business loan. If you aren’t truly bankrupt or facing extreme economic hardships, it’s best that you explore other resolution options at your disposal.
What Happens if You Ignore IRS Wage Garnishment?
Once you receive a notice of tax levy from the IRS, it’s advisable to act quickly, either by disputing the tax levy (if you believe it’s a mistake) or paying your tax debt in full. Another option is to apply for alternative resolution options in case you can’t pay in full. You must do this within 30 days of getting the notice.
If you ignore the notice, the IRS will enforce the levy, notifying your employer to begin withholding a part of your paycheck. The IRS also charges a failure-to-pay penalty of 0.5% of the unpaid tax amount for each month or part of a month that the debt remains unpaid.
The implication is that you’ll be responsible not only for the original amount due but also the amount accrued in penalties. This is risky as it can lead to debt piling, which will definitely take longer to pay off. There’s also the risk of serving jail time, as failure to address tax obligations may be considered an intentional attempt to evade taxes.
How to Prevent IRS Wage Garnishment in the Future
Wage garnishment doesn’t happen without a reason. It’s usually the result of prolonged non-compliance or ignoring IRS notices. Once you have your wage levy released, keep to the following:
1. File Your Tax Returns On Time
Even if you can’t pay your tax bill in full, always file your returns. Filing late or deciding not to file at all will trigger your risk of collection actions like garnishment, IRS levies, penalties and interests.
2. Set Up a Tax Payment Plan if Needed
If you think paying your back taxes in full at once may be too burdensome, you can set up an IRS payment plan if you qualify for it. A payment plan lets you make tax payments gradually and at a frequency that suits your budget, whether weekly, biweekly, or monthly. Setting up a payment plan shows the IRS that you’re willing to cooperate, which can help you avoid garnishment entirely.
3. Keep the Lines of Communication Open
Ignoring IRS letters and notices is the fastest way to end up with a levy on your wages. If you receive a notice, respond promptly. If you’re unsure of what to do next, call your tax attorney. Many people do not know this, but the IRS is always willing to work a reconciliation strategy with taxpayers who engage early.
4. Work With a Tax Professional
The consequences of failing to comply with tax obligations can be severe, and ignorance of the law is never a valid excuse when dealing with the IRS. A seasoned tax attorney can help you stay compliant, explore relief programs, and prevent future garnishment issues. They’ll also represent you in communications with the IRS, taking the stress off your shoulders.
How a Tax Attorney Can Help Stop Wage Garnishment
Hiring a tax professional is one critical action to take when dealing with tax debt from the federal government. If you’re wondering whether hiring a tax attorney is worth it, here are the benefits of working with a tax relief expert:
- Negotiating with the IRS on your behalf: A tax attorney can help you understand your rights, represent you before the IRS, and negotiate with the IRS to reduce or eliminate the garnishment. They will also work with the IRS to find a plan that fits your budget if you choose to set up a payment arrangement. If not, they can negotiate to get you other suitable tax relief options.
- Navigating complex forms and compliance: When it comes to legal matters, detailed documentation and adherence to due process are key. Working with a tax expert is non-negotiable if you’re not familiar with tax matters and procedures. The tax attorney will handle the paperwork, ensuring you fill out the forms correctly and verify your tax records and any previous correspondence with the IRS to ensure the garnishment is legitimate.
- Avoiding common mistakes in the process: Stopping a wage garnishment requires timely action and maximum accuracy in the process. The expert guidance of a tax attorney helps you to avoid common mistakes that could undermine your attempts at stopping the garnishment.
Need a Tax Lawyer to Stop IRS Wage Garnishment?
While the IRS may appear formidable, with the right strategy, you can halt wage garnishment and regain control of your financial situation. When possible, the best approach is to pay your taxes in full. However, if that’s not feasible, you can negotiate with the IRS to explore other resolution options. If you’re unsure of your next step, a tax attorney can provide invaluable assistance.
From offering advice on which tax resolution option best suits your situation to guiding you through the process of stopping a wage garnishment, hiring a tax attorney is beneficial. Your tax attorney will also negotiate with the IRS on your behalf.
These are precisely what we offer you at Victory Tax Lawyers. Over the years, we’ve helped clients with IRS tax debts resolve and avoid wage garnishment, and we can do the same for you. Schedule a free consultation today to speak with our team of seasoned wage garnishment lawyers.
