What Is IRS Wage Garnishment?
If you have back taxes, IRS is then authorized to seize your wages or properties and take a portion of your paycheck. However, to do this, strict guidelines must be followed. IRS will get in touch with your employer and instruct them accordingly to take a portion of your pay. Your employer will also send the money to the agency. The employer should comply with this right away or else the liabilities could be passed on to him or her. Understanding the rules of engagement with IRS wage garnishment will arm you with the knowledge to file for an appeal or stop it.
How Much of Your Salary Can the IRS Garnish?
If you fail to comply or resolve the issue upon receipt of the Notice of Your Right to a Hearing and Final Notice of Intent to Levy, IRS will then proceed with garnishing your wages.
IRS has the power to garnish bonuses, salaries, commissions, wages, and even your pension and retirement fund. The IRS will not just take out a specific percentage of your wage. It will instead dictate how much you would need and then garnish the rest. The IRS makes a decision based on a table that helps them to determine the amount that can levy from your salary for each pay period. The amount that is exempted from IRS levy will depend on the standard deduction imposed on your pay as well as the number of dependents that you have. More so, your filing status, the number of exemptions you have as well as your payment frequency will help your employer determine the specific amount of money that you get from each pay period.
The amount that will be left in your paycheck would most likely be below your spending needs. As of 2017, single individuals with one exemption will be left with only $200 per week or equivalent to $866.67 monthly. Now, if you are married and filed jointly declaring four dependents, then you get to keep $555.77 weekly or about $2408.33 monthly. So, with that in mind, any excess amount can then be taken by the IRS.
For instance, if you juggle two jobs and the other one covers your daily expenses, IRS may take 100% of your salary from that other employment you have. Also, if your employer gives you a bonus, IRS may also take that.
This levy stays in effect until you have completely paid off of your tax debt, or if you have made some arrangements or alternative payment options, with IRS. In the same way, the agency will also release or stop the levy once the statute of limitations imposed on collection is in place.
When Will IRS Implement a Wage Levy and Garnish Wages?
Tax levy follows after a tax lien and when you have been delinquent in tax payments. There are some instances, though, that IRS would skip the tax lien and rolls out the levy process right away.
A tax levy is the process wherein IRS seizes your assets in order to satisfy tax owed. IRS has the authority to collect from your wages, properties, Social Security benefits, bank accounts, property, commissions, retirement accounts, rights to property, and so forth. If you are working for an employer, IRS can go for a wage levy to garnish a percentage or all of your paycheck. In order to levy properties, paycheck, or any form of assets, the agency must adhere with the following rules and requirements.
- IRS has reviewed tax liability and sent taxpayer a notice to demand for Payment.
- The taxpayer has refused or failed to settle tax owed.
- IRS has forwarded you two notices – Notice of Your Right to a Hearing and Final Notice of Intent to Levy which must be sent to the taxpayer 30 days before the levy is in effect.
IRS has two delivery options: send the notices via registered mail to your home address or employment address or deliver the notices by hand. Either way, once you receive the notices of Final Notice of Intent to Levy and Notice of Your Right to a Hearing, IRS can now proceed to levy after a period of 30 days.
IRS Levy Exceptions that Does Not Provide a 30-Day Advance Notice
The IRS will not always give you that 30-day standard notice to remind you of your right to hearing. They may move forward to levying your property or seizing your assets. Below are some scenarios that do not warrant any advance notices:
- Jeopardy Levy – In the event that IRS feels tax collection activities are in jeopardy, then they can go ahead with levying your property without the need to send out a notice in advance.
- A Disqualified Employment Tax Levy – If in case, you have already requested before for a collection due process hearing for employment taxes or payroll for a particular tax period in the last two years, then the IRS can proceed to levy for the other tax periods even without providing you any advance notice of such activities.
- Federal Contractor – Being a federal contractor, the IRS can automatically seize your assets or properties without any advance written notice.
- State Tax Refund Levy – IRS can go ahead to levy state tax fund without providing you advance notice.
Requesting for an appeals conference at the earliest possible time or within the 30-day period can help deter wage levies or seizure of your assets
The IRS would rather not impose such wage levies because these activities are not cost-efficient. IRS would rather use such as a threat to evoke action.
However, if all else fails and you do not file any dispute to challenge such levies then IRS will push through with levying your wages or properties. In order to prevent this, it is advisable to request for a free consultation from a licensed tax specialist to help you weigh your options before responding to a final notice. A licensed tax professional can directly get in touch with the IRS to renegotiate and apply for the most suitable payment plan such as for hardship status or settlement; among others.