Tax Wage Garnishments and Levies
How to Stop Wage Garnishments and Levies
Everyone in the United States is required to pay federal taxes. Unfortunately, many people have lost their jobs or face other extenuating circumstances that make it difficult to meet their tax obligations. Unlike other collection agencies, the Internal Revenue Service has a wide variety of aggressive debt collection tactics they can use to ensure taxes are paid.
Wage garnishment or tax levies are one of the main methods the IRS can use to secure payment for all tax liability. Wage garnishment is a legal order which mandates that an employer keep a percentage of an individual's wages or earnings from each pay period to pay debt. Wage garnishments are not only used by the IRS but also may be used by other creditors to repay personal debt. Certain states have laws restricting the use of wage garnishments to repay personal debt.
Employers will not be allowed to refuse a wage garnishment order with out severe legal repercussions. Federal tax debt is considered a priority debt and will be paid before state or personal debt is repaid.
Federal Debt versus Private Debt
Private debt or debt owed to a business or credit card company is not the same as federal tax debt. If an individual's state allows wage garnishment for private debt collection, the creditor will have to win a judgment against the debtor in court. If the Internal Revenue Service wants to garnish a taxpayer's wages under United States Federal tax law no court order is required.
To garnish a taxpayer's wages the IRS must have demanded the tax and sent a written notice for payment, the taxpayer must have refused or failed to pay the tax liability before the deadline, and the IRS must send the taxpayer a Final Notice of Intent to Levy and Notice or Your Right to a Hearing, thirty days before the wage garnishment begins.
The IRS has several options for serving the Final Notice of Intent to Levy and failure to receive the notice will not be enough to stop the wage garnishment.
Laws Restricting Garnishment
Not all states will allow wages to be garnished for private debt. Texas, Florida, and Nevada do not allow wages to be garnished to repay a private creditor. Pennsylvania allows wage garnishments for taxes and child support. Texas allows wage garnishments for child support payments. And North Carolina, wage garnishment is allowed for unpaid taxes, certain hospital debt and child support payments. A Tax Attorney can be contacted to determine when a wage garnishment is allowed. If a state allows wage garnishments they are allowed most often for the following:
- Child support
- Unpaid state and federal taxes
- Court fines
- Student loans
- Restitution for a crime
- Personal debt- North Carolina, Pennsylvania, Texas and South Carolina do not allow wage garnishment for this type of debt.
If an individual's state allows wage garnishments, there are federal laws which have been passed to limit the amount of wage which can be garnished. Under federal law 75 percent of the disposable weekly earnings or the amount equal to thirty times the federal minimum wage, or whichever is more, is protected from wage garnishment.
Some states may allow a greater amount of disposable income to be exempt from wage garnishment, but most states will match the federal provisions. The amount allowed is the same for all of the states and can not be overturned by state law. If the federal laws allow for more exemptions than the state laws, the federal law will prevail. Child support, alimony, federal student loans and taxes are not restricted by these limits.
How to avoid an IRS Wage Garnishment
Many people who owe a substantial tax liability try to ignore the problem and hope the Internal Revenue Service will not collect. Unfortunately, not only does the IRS not forget, failure to pay federal taxes can result in very costly penalties, interest and aggressive tax collection methods not available to other private creditors.
Taxpayers who owe back taxes or a tax liability they can not pay, should contact an Enrolled Agent, Certified Public Accountant (CPA) or Tax Attorney as soon as possible to discuss tax settlement options. In general, there are four methods that a taxpayer can use to avoid an IRS Wage Garnishment.
- 1. Pay the tax bill in full- if the amount is not in dispute, and you are able to pay the tax bill the best option is to pay the bill in full as soon as possible.
- 2. Installment Agreement- If a taxpayer does not have the money to pay their taxes in full, the IRS may work with the taxpayer to develop a pre-approved plan to make monthly installment payments to repay their taxes. Penalties and interest will not be eliminated with an installment agreement.
- 3. Offer in Compromise- Certain taxpayers may qualify for a tax settlement option called offer in compromise. The offer in compromise is an agreement between the taxpayer and the Internal Revenue Service to pay less than the amount of taxes due to settle the tax liability more quickly. It is important to talk to an Enrolled Agent, Certified Public Accountant (CPA) or Tax Lawyer prior to applying for an offer in compromise.
- 4. Currently Not Collectible- If a taxpayer has some type of severe economic hardship which does not allow them to pay back taxes or the current federal tax liability, the IRS may determine their tax debt is "currently not collectible". Unfortunately, taxes and penalties will continue to accrue.
Stopping Wage Garnishment
The federal government and the IRS have incredible power to use wage garnishments to settle unpaid tax debt. Not only can they take a percentage of an individual's wage, they may claim part of the worker's commission, bank accounts, fees and bonuses. There are limits for the types of property or possessions they can levy, but the laws can be complex and the IRS can be very aggressive. Experienced professionals can be an invaluable resource for a tax payer to fight back against the Internal Revenue Service.
It is important that you find someone with knowledge of how the systems work to help you settle your tax debt. If you need help with your tax problems, contact us and we will put you in touch with an Enrolled Agent, Certified Public Accountant or Tax Attorney near you who can review your situation and provide you with the advice you need.
Remember that above all you must also be honest with your advocate. No one can get out of trouble with the tax man if you are not up front and honest with them.