Wage Garnishment

Wage garnishment is a process where a state court mandates an order regarding the redirection of a portion of your paycheck to a creditor you owe money to until the debt is resolved. In the world of taxes and the government, the IRS can garnish your wages without going through the state court rules and requirements that typical “creditors” must go through. In IRS wage garnishment continues until the tax liability is paid off.

Federal law allows only state and federal government agencies to take an individual’s tax refund as a payment towards the tax delinquency. Private individuals and companies that an individual may be indebted to are not allowed to garnish a tax refund for payment. In line with wage garnishment, an individual’s anticipated tax refund can also be intercepted for payment towards a tax debt. The debtor will receive a notice from the treasury department’s Financial Management Service (FMS) that an interception has occurred. The notice contains information regarding the original tax refund amount as well as how much was offset in the interception. If an individual receives a notice from FMS regarding the anticipated tax refund, the appeal process is available to attempt to reverse the course of that tax refund. Hardship issues can also avert, or reverse, an interception of a tax refund.

The IRS will give you a number of notices before they begin garnishing your wages. These notices contain all the information about the debt owed, interest, penalties, and other taxes that have accrued. Your notice will also contain a definitive due date to pay your tax delinquency. If you fail to pay by the due date, or fail to proactively contact the IRS, you will receive a “Final Notice of Intent to Levy” that gives you thirty (30) days to pay the amount due or file a request for a Collection Due Process Hearing before the IRS begins the garnishment process.

It is important to note that the IRS, and State tax service, go to great lengths to notify you of a tax delinquency that is attributed to your name and Social Security number. Ignoring the notices leads to more problems and questions. It is the duty of the IRS to collect taxes that are owed, and to refund taxes that have been overpaid. None of this is done by the IRS calling you and threatening you with levies and garnishments of your funds and property. It is your proactive responsibility to call the IRS when you receive a notice about your alleged tax liability. Telephone calls inquiring about your tax information, social security numbers, bank accounts, etc. are from scammers who do not represent any Federal or State tax service.

State tax authorities and other creditors can withhold up to 25% of your paycheck. The IRS takes into account many factors to determine the amount of money they will garnish from your wage including filing status, standard deduction and the number of dependents that make up your household. They do not factor in your actual expenses when determining the amount they will garnish from your paycheck. It can be 50% or more of your wages and, if you have a second job, the IRS has the authority to garnish all of that wage until your indebtedness is satisfied.

It is important to contact the IRS, or a tax attorney, when you begin to get notices regarding wage garnishment. There are many opportunities for the tax debt or when you start early and are proactive. Most states will agree to lower or modify the state wage garnishment if you demonstrate “hardship” and the IRS will usually agree to stop the garnishment when you enter a IRS Installment Agreement. The IRS has a Fresh Start Program that offers a series of settlement solutions to your tax debts. The Offer in Compromise requires that you only pay a percentage of the tax that is owed. It is a repayment option that is satisfactory to both your ability to pay and is suitable to the IRS. It is important to make a reasonable offer that details your precise income, expenses, asset quality and other financial information as it pertains specifically to you. The Installment Agreement allows you to make payments each month that are affordable and that can be made, on time, without facing financial problems and hardships each month. The best-laid plan is a reasonable plan. Finally, the IRS will pause collections, temporarily, for those taxpayers who are given a Non-collectible Status. Following the old adage that you can squeeze money from a rock, the IRS can push the pause button while you attempt to get your feet back under you and become a bit more financially stable.