A tax levy on your paycheck is also referred to as wage garnishment.
This can happen when you owe money to the IRS from unpaid taxes. The IRS has a legal right to take money directly out of your paycheck to pay the taxes you owe.
To do this, the IRS will contact your employer directly and tell them how much to pay to you and how much to send directly to them. States are allowed to use the same means to collect unpaid taxes owed to them as well.
The IRS tells your employer to garnish your wages by sending them this IRS publication. It contains a table that states how much you will get paid and then the IRS will take everything else.
There are several factors that determine how much of each paycheck you can keep. These include:
- Your tax filing status
- How frequently you are paid
- How many dependents you claim
- Whether you are 65
- If you are blind
These factors affect how much you can exempt from garnishment. You can consult the table linked above for an estimate of how much of your paycheck you can keep.
The IRS has the right to levy any bonus income you receive in addition to your regular paycheck. Unfortunately, because you were already paid your allowed amount in your regular paycheck, the IRS can keep your entire bonus check. Your employer will be forced to send the entire check directly to the IRS.
The IRS has the right to levy to collect back taxes under this section of the tax code.
Tax Levy Qualifications
Fortunately, most people can avoid a tax levy on their paycheck by taking action before things get to that point.
Remember that if you’re ever receiving notices from the IRS, don’t ignore them! Contact a tax attorney right away to stop things in their tracks.
In order for the IRS to have the legal right the garnish your wages, several things must first occur:
1. The IRS determines that you owe unpaid taxes and sends you a notice demanding payment.
2. You fail to respond to the notices from the IRS and fail to pay what you owe.
3. The IRS must send you what is called a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” They are required to send this at least 30 days before garnishing your wages.
If you don’t respond to the final notice, the IRS has the right to start garnishing your wages after 30 days. It’s important to note that there are some exceptions.
The IRS isn’t subject to the rules listed above if they feel the collection of the taxes owed is in jeopardy. If you are a federal contractor and owe taxes or you were issued a Disqualified Employment Tax Levy, you will not be offered a hearing before the levy starts.
What Can the IRS Levy?
The IRS has a lot of power when it comes to what they can levy, but there are some restrictions.
They can take your salaries, commissions, wages, dividends, and payments on a promissory note held by someone else. They can also levy your bank account, any bank account you are a joint account holder on, retirement accounts, your house, your car, federal retirement income from the Office of Personnel Management, federal contractor payments, and other property.
The IRS can’t take certain types of property. These include Social Security Disability Insurance, unemployment benefits, specific public assistance payments, workers compensation benefits, some annuity and pension payments, court-ordered child support payments, and assistance from the Job Training Partnership Act.
They also can’t take your schoolbooks, clothing, or certain amounts of fuel, books, furniture, and tools for business, professions, or trades.
Avoiding and Stopping a Tax Levy
The number one way to avoid a tax levy on your paycheck is to file your taxes correctly and make all payments on time. The goal is to owe nothing to the IRS.
If you are struggling to make your tax payments, a tax relief professional can help. There are many options available to get you out of tax debt including payment plans, settlements, penalty reductions, offers in compromise, etc.
The worst thing you can do is bury your head in the sand and ignore the IRS. If things have gone too far and the IRS is already garnishing your wages, it’s not too late to stop the process.
You can contact the IRS to come to an agreement or resolution and stop having your wages garnished.
Contact Us Today
If you have a tax levy on your paycheck or the IRS is threatening you with one, you need a tax professional who specializes in tax debt relief on your side.
We are experts in helping our clients get out of tax debt.
Contact us today to get your tax problems solved.