IRS garnishment is a serious legal situation that affects financial stability and life. However, in several ways, you can protect some or all of your income from garnishment.
Let’s keep reading and learn about how to manage this situation.
What is IRS Garnishment?
With tax lien, the IRS makes a legal claim on the taxpayer’s property to meet a tax debt. They can place liens on valuable assets, such as real estate, jewelry, art pieces, or antiques. However, when a lien has been placed, the IRS doesn’t buy or sell the asset until the debt is paid.
If the debt still isn’t unpaid, the IRS may take an action. One of them is seizing property. With seizure, the IRS actually seizes any physical property. Then, the IRS can sell your assets to collect the debt. However, it’s mostly rare action, because before it, the IRS adopt tax levy or wage garnishment ways.
Tax levy is a single action by the IRS to seize a specified sum from a taxpayer’s income tax refund or bank accounts. Yet, garnishment is a type of levy. That is, the IRS places liens on incomes such as retirement, rent, wage, or salary. Garnishment (especially wage garnishment) is the type of action most preferred by the IRS. Therefore, they take the money directly from paychecks, but they leave a small exemption for living expenses.
Additionally, when you owe a debt a creditor, officials send you one last letter (a demand letter) before they begin the legal process. On the contrary, the IRS doesn’t need a court order for a tax levy. Still, they send you a Finale Notice of Intent to levy with a 30 days notice. Once you get it, you shouldn’t ignore because, in this process, you can stop or negotiate for your future.
How Much of Your Wages Can Be Garnished?
The maximum amount that can be taken from your salary will depend on your income. However, even if the IRS place a garnishment on your wage to collect your tax debt, they leave the minimum amount for living, called the exempt amount.
- If you’re single with no dependents, it’s $1079.17 per month.
- If you’re a married couple with two dependents, it’s $2891.67 per month.
Then, the IRS take any money above the exempt amount by garnishing your wage.
How do you know if the IRS will garnish your wages?
The IRS hands over or mails a Final Notice of Intent to Levy to your last registered address or workplace. With this notification, you should know that the legal proceeding starts after 30 days. Or, you can take action to stop the wage garnishment within 30 days.
To start garnishment, the IRS sends from 668-W to your employer. After that point, the employer must send the money to the IRS, or it may be penalized.
How to Stop IRS Garnishment
Full Pay Off the Debt:
The court will stop the garnishment if the debtor pays off the debts, including court costs. However, this can be difficult for people with bad financial standing.
If there are alternatives to finding the money, paying off the debt would be the fastest way to stop the garnishment. For example, borrowing money from someone else, like family members. Even though you’ll owe another person this time, you’ll avoid lowering your credit score.
Work with the IRS:
The IRS sends at least four letters in 5 months before levies begin. They allow 30 days to start the process after the last Final Notice of Intent they sent. If you don’t take any action within this time, the IRS will now automatically initiate the process.
However, at this point, you can stop the garnishment by creating a hearing request with Form 12153 in the last letter. Keep in mind, you have 30 days for this request.
Collection Due Process Hearing: For the Collection Due Process hearing, you can call them in person. However, tax laws may confuse you, so working with a tax lawyer will be much stress-free and easier for you.
Disqualified Employment Tax Levy (DETL): If a taxpayer has had a Collection Due Process (CDP) hearing about payroll taxes and incurs another payroll tax debt within two years, the IRS can levy immediately, without waiting 30 days.
New Installment Payment:
You can discuss with the IRS a new payment plan that fits your financial situation. For this, you need to contact the IRS and prove that you cannot pay your debt once. When you make installments, you have to pay on a monthly basis until your debt is closed.
You can offer a settlement to reduce the amount you owe the IRS. Of course, they don’t allow this opportunity for everyone. They’ll check if you’re eligible for Offer in Compromise. However, the IRS will stop the wage garnishment while your application is being reviewed.
“Meet Basic, Reasonable Living Expenses” Situation:
You can also temporarily stop the IRS from placing a lien on your paychecks if you’re in financial trouble for a pay lien. To report this, you need to phone the IRS directly. Of course, you have to prove this with documents. While the IRS won’t temporarily withhold your paycheck, that doesn’t mean the case is closed. You still have to find a new way to pay off your debt and create a new payment schedule with the IRS.
File for Bankruptcy
Filing for bankruptcy generally immediately stops garnishments. Depending on the type of bankruptcy you qualify for, you can have a new debt restructuring that suits your financial situation, liquidate your assets to pay off, or discharge your remaining debt.
We recommend that you consult with a lawyer to clearly understand whether the bankruptcy option is the right decision.
Does quitting the job stop the IRS tax garnishment?
Yes, it does because when you don’t win to market, the IRS can’t take wages to cover your tax debt. However, this is not a recommended way. Ultimately, the IRS will use different methods to collect your debt.
Next step: Get help from a legal service today
Need help keeping up with your financial obligations? And, looking to get rid of garnish? We are available to talk anytime. We want to help you and offer a free consultation. Call us now.