Wage Garnishment is a legal procedure in which a portion of an employee’s wages is withheld by an employer and paid directly to a creditor to satisfy a debt. For tax purposes, IRS wage garnishment (officially called a wage levy) occurs when the IRS seizes wages to collect unpaid federal tax debt after other collection attempts have failed. This powerful collection tool can significantly impact your take-home pay and financial stability.
IRS wage garnishment typically follows a series of notices and warnings. The IRS must send a Final Notice of Intent to Levy at least 30 days before implementing garnishment, providing opportunity to pay the debt, set up a payment plan, or appeal the action. Unlike most creditor garnishments that take a percentage of disposable income, IRS wage levies leave you with a minimal amount based on your filing status and dependents, often garnishing much larger portions of your paycheck.
The amount exempt from IRS levy is determined by filing status and number of dependents, published in IRS Publication 1494. For 2024, a single person with no dependents might have only about $400 per week exempt, meaning the IRS can take everything above that amount. This differs from non-tax garnishments, which are typically limited to 25% of disposable income under federal law, or the amount by which weekly wages exceed 30 times the federal minimum wage, whichever is less.
Options to stop or reduce wage garnishment include paying the tax debt in full, setting up an installment agreement before garnishment begins, requesting Currently Not Collectible status due to financial hardship, submitting an Offer in Compromise to settle for less than owed, filing for bankruptcy (which triggers an automatic stay), or appealing the levy through the Collection Due Process hearing.
Wage garnishment continues until the debt is paid, an alternative arrangement is made, or the collection statute expires (generally 10 years from tax assessment). Employers are legally required to comply with garnishment orders and cannot terminate employment solely because of a single garnishment. Multiple garnishments, however, may have employment consequences.
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