How to Stop an IRS Wage Garnishment

The IRS can utilize a number of different methods to collect on a tax debt that you owe. Among them, wage garnishment is one of the most common. You may be able to avoid an IRS wage garnishment by learning under what circumstances it is used and how it could possibly be released if you owe a debt to the IRS.

How Does an IRS Wage Garnishment Work?

Before the IRS can legally garnish your wages, it must first notify your employer of its intent to do so. This notification immediately alerts your employer to your tax troubles. By law, your employer must permit the IRS to withhold money from your paychecks to pay off the debt.

Moreover, the IRS can withhold a larger amount of your paychecks than other types of creditors. It only has to leave you $375 out of each paycheck on which to sustain you and your household. If you are self-employed, the IRS can claim all of your yearly income to pay off your tax debt.

How an IRS Wage Garnishment Affects You

The IRS has virtually unlimited access to your income once it decides to garnish you. It has to leave you enough with which to cover necessities. However, it does not consider certain expenses to be necessities. These expenses include:

  • Mortgage or rent
  • Utilities
  • Food
  • Medical or insurance costs

The IRS uses a pre-determined table to decide how much to garnish out of your paychecks. As mentioned, it only has to leave you $375 on which to live out of each paycheck. You could end up with far less income with which to cover basic expenses in your household. You could possibly even face financial hardships because of having your wages garnished by the IRS.

Removing an IRS Wage Garnishment

Once the IRS begins garnishing your wages, it is not often inclined to release it until the debt is paid in full. It may not even allow you to request a release of the garnishment if you are experiencing financial hardships such as not being able to pay your rent or mortgage.

While difficult, it is not entirely impossible to have an  IRS wage garnishment  released before the debt is paid in full. Your best option for asking for a wage garnishment release could be to hire a tax resolution specialist to assist you in the process. A tax professional can appeal the wage garnishment or present evidence for why it should be released right now rather than after the debt is satisfied.

Examine Your Tax Situation

Another reason to hire a tax professional is to assess the reality of your tax situation. You may not know how much you owe to the IRS. You also may not know if you have any missing returns that need to be filed.

A tax resolution specialist can help you request a copy of your outstanding account balances from the IRS. He or she can also help you find any discrepancies in your records that could result the debt being larger than you actually owe. Your tax professional can contact the IRS on your behalf and get a copy of those records so you can possibly avoid a wage garnishment.

Pay Off Your Debt

Once you know how much you owe, you may then decide how best to pay off the account. If possible, you should pay off the account entirely in one lump sum payment.

If you do not owe a huge amount but more than you have saved in your bank account, you could ask your relatives or friends for a small loan. This idea may be best if you want to avoid expensive penalties and interest from being applied to your IRS debt.

Set Up an Installment Agreement

If you cannot pay off what you owe in full in one payment, you could request to be set up on an installment agreement with the IRS. To make this request, you must fill out and submit IRS Form 9465.

An installment agreement allows you to make monthly payments on what you owe. The payments are also based on your income, so they are affordable and in line with what you earn. You can also choose on what day of the month you would like that payment to be due.

Request an Offer in Compromise

Another option you have is to request an Offer in Compromise An OIC allows you to pay off your account for less than what you owe. You could end up paying pennies on the dollar for your entire tax debt.

Because the IRS grants relatively few OICs to taxpayers, you may need the help of a tax professional to make this request for you. A tax resolution specialist will know what forms to file and what evidence to present to show that an OIC is the most realistic option for settling your tax debt.

Demonstrate Financial Hardship

If you cannot get tax relief through any other option, you may succeed by demonstrating genuine financial hardship. If you can prove that paying off your IRS debt would result in extreme financial difficulties for you and your family, you may earn a reprieve from the IRS.

To demonstrate this hardship, you will be asked to show proof like bank statements and paycheck stubs. You will not be given a total wage garnishment release, but you will be given enough time to get your financial affairs in order, so you can make payments on or pay off the debt entirely in the near future.

Appeal a Tax Levy

By law, you have the right to appeal an IRS tax levy. You have 30 days from the time you receive written notice of the IRS' intent to garnish your wages.

You can request a hearing to dispute the amount you owe. You also can have a tax adviser with you to argue your case during the hearing.

Consider Filing for Bankruptcy

As a last measure, you can file for bankruptcy to avoid an IRS wage garnishment. This option should be used when all other options fail.

Filing for bankruptcy prevents the IRS from collecting money from you. It will not forgive your tax debt. However, it stops the IRS from garnishing your wages until after the bankruptcy case has been discharged. By that time, you and your bankruptcy attorney may have a solution for settling the account in a timely manner.

Get the Assistance of a Tax Resolution Specialist

Regardless of the method you use to avoid an IRS wage garnishment, you may fare better by hiring a tax resolution specialist to help you. A tax professional can help you figure out what repayment method is best for you. He or she can also communicate with the IRS on your behalf and file and submit paperwork to request an OIC or installment agreement to pay off what you owe.

An IRS wage garnishment can leave you in financial difficulties that may last for years. The IRS can take as much money as it wishes out of your paychecks. When you hire a tax resolution specialist, you may be able to use other methods to help you avoid an expensive and lengthy IRS wage garnishment.

4 Tips to Appeal an IRS Wage Garnishment

Being in default to the IRS is entirely different than owing money to a credit card company or a hospital. In fact, while most creditors must obtain a court order to garnish your income, the IRS can levy your wages without one.

Because being garnished by the IRS often proves to be a grave and legally complicated matter, you should understand what you can do to appeal the garnishment and remove the levy from your paycheck. After you receive a notice to levy from the IRS, you should take these steps to protect your income.

Appeal within 30 Days of Notice

Acting quickly must be your first priority when you receive a notice to levy from the IRS. Within 30 days, you must contact the IRS by calling the telephone number on the notice and request an appeal. You can request an appeal if:

  • Your debt to the IRS has already been paid in full
  • You were notified of the intent to levy during an active bankruptcy filing
  • Your debt's statute of limitation has expired
  • An error was made during the tax assessment
  • You qualify to file for innocent spouse relief
  • You were previously not given the chance to appeal the debt

If you meet any of these circumstances, you could file for an appeal and have your tax debt reconsidered.

Use the Proper Appeal Form

When you plan to file for an appeal, you must use the proper IRS form to start this process formally. You can find the form 12153 on the IRS website. It must be completed entirely and mailed to the division of the IRS stated on your notice.

It cannot be scanned and emailed, nor faxed to this division. You must mail it within 30 days after you receive the notice to levy.

Contest the Appeal Decision

After the IRS has decided your appeal, you can still avoid being garnished by contesting the decision. As with filing an appeal, you must contest the decision within 30 days' time after it is rendered.

File for Garnishment Exemption

As with a regular wage garnishment, you could file for an exemption in court if you believe that you cannot afford to be garnished by the IRS. When you ask the court for this relief, you must have documentation that supports your argument. The court will want to know details about your finances and household like:

  • Your total household income
  • The number of dependents you support
  • Your rent or mortgage payment amount and other bill amounts you pay each month
  • Any unique circumstances like being disabled that could affect your ability to provide for your family

If the court finds that you legitimately cannot afford the garnishment, it may order the IRS to release the levy. However, if you plan to ask for an exemption, you may fare better by relying on a tax professional to advise you throughout this legal process.

Just like other creditors, the IRS makes sure that every debt that is owed to it is paid in full. When you receive a notice to garnish your wages, you can avoid the financial hardship that comes with this action by filing for an appeal. Before you file for an appeal, however, you should understand what methods are available to you.

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