When you fall behind on your tax obligations, the IRS has the authority to take a portion of your paycheck in the form of wage garnishment. But when? Generally, the IRS will start the garnishment process after you have failed to pay for a while and ignored several notices. The exact timeline varies, but once you receive a Final Notice of Intent to Levy that also outlines your right to appeal, the IRS has the right to issue a garnishment to you after 30 days.
The good news is that there are ways to prevent a garnishment. The IRS will only start the garnishment process when you owe a tax debt and haven’t contacted them about resolving the situation. Generally, the garnishment shouldn’t be a surprise. You should receive numerous notices first, so you’ll have ample opportunity to resolve your situation before it gets to the point of garnishment.
If you’re currently facing this type of tax situation, then our team of tax resolution attorneys here at Wiggam Law can help you navigate the process. We’ll review your tax situation, financial status, and potential tax solutions to guide you toward making an informed decision on solving your tax matters for good. Learn more about when the IRS will garnish your wages, preventing wage garnishment, stopping wage garnishment, and how our team of tax attorneys can help below.
Understanding the Wage Garnishment Process
Wage garnishment is a collection action that legally allows a creditor to withhold a portion of a person’s paycheck to resolve an outstanding debt. The garnishment can continue until the debt and any interest is paid in full.
With an IRS garnishment, your employer will receive a letter informing them about your situation. Once your employer gives you the paperwork to calculate the garnishment, you only have three days to complete and return a Statement of Dependents and Filing Status to the IRS. If you don’t, the IRS will use the lowest possible exemption amount to garnish your next paycheck. They will calculate your garnishment as if you are a single filer with no dependents, which results in the IRS garnishing a significant portion of your paycheck, sometimes even as high as 90% of your pay.
When the IRS Will Garnish Wages?
The wage garnishment process starts with inaction from you, the taxpayer. The IRS can garnish your wages if you do not pay your taxes. To do so, the agency must send you a demand for payment followed by a Final Notice of Intent to Levy With Right to Appeal. Then, they can start the garnishment after 30 days.
The garnishment timeline varies based on why your taxes were unpaid. You may have unfiled taxes from past years, and the IRS may have issued a substitute for return (SFR) to assess taxes against you. In that case, you get 90 days to respond to the proposed assessment, and if you ignore it, the IRS will start the collection process, which can eventually lead to wage garnishment.
If you filed a return and didn’t pay, the process will typically be a bit faster. In this case, the IRS doesn’t have to issue an SFR or give you 90 days to contest the assessment. Instead, if you ignore the balance due letters, the IRS can move to the Final Notice of Intent to levy as soon as it wants.
In other cases, you may have a tax bill due to failing an audit. In this situation, you will have time to appeal the audit assessment, but once that window closes and the IRS formalizes the assessment, the agency can start the collection process. Again, once they send the final levy notice, the garnishment can start in 30 days.
Why Does the IRS Garnish Wages?
Under federal law, the IRS has the legal authority to take collection actions against a taxpayer who has the ability to pay off their tax obligations but isn’t doing so willingly. These collection efforts range from taking money from your paycheck to seizing your car or home.
The IRS’s automated collection system (ACS) can start a wage garnishment. Basically, if the computers see that you have unpaid taxes and that you also have a job due to reports filed by your employer, the ACS will send you the required notices and initiate the garnishment process. If a revenue officer is assigned to your account, they can handle this process manually.
Although the IRS has broad authority to seize many different assets, the agency will most likely start with garnishing your wages and/or seizing the funds in your bank account. Both of these measures are easier than seizing personal property or real estate.
What Notices the IRS Will Send Before Garnishing Your Wages
The IRS must follow a standard procedure when it comes to tax debt collection. You should never face an unexpected garnishment from the IRS since the timeline for wage garnishment requires multiple notices to be sent out to your address first.
Typically, the IRS will send out the following notices before the garnishment starts:
- CP14: A notice regarding a balance due and demand for payment
- CP501: A reminder that you have unpaid taxes
- CP503: Your second reminder regarding your unpaid tax balance
- CP504: A final reminder of your balance and a notification of an intent to levy your wages, bank accounts, or state tax refund
Although CP504 states that the IRS plans to levy your wages and other assets, you will receive another notice before this happens. After sending CP504, the IRS can seize your state tax refund, but they must notify you of your right to a hearing and give you 30 days to request a hearing before they can garnish your wages.
Typically, it can take anywhere from around 10-25 weeks from the time you first receive CP14 to the point when you’re experiencing the garnishment. The timeline varies, but once you get the first notice, expect to see them come on a six to eight-week basis.
What if a Revenue Officer Is Involved?
If you’re not cooperating with the agency, then they might assign an IRS Revenue Officer to your case. This IRS agent is tasked with collecting payments from you to resolve your balance, and they’re usually very persistent. A Revenue Officer won’t shy away from visiting your business or household, but they will send you an appointment letter first. The IRS ended unannounced house calls a couple of years ago.
Wage garnishment can be implemented if the Revenue Officer determines that you are unwilling to take care of your tax debt voluntarily. They believe that garnishing your wages is the most effective way for the IRS to get its money.
However, as noted above, you can face garnishment even if the IRS has not assigned a revenue officer to your case. The IRS’ automated collection system can also initiate a wage garnishment.
Are There Any Exceptions to the 30-Day Rule for IRS Garnishment?
In general, you have up to 30 days from the date on your Final Notice of Intent to Levy to file an appeal regarding wage garnishment. This 30-day period is designed to give taxpayers ample time to stop a wage garnishment, negotiate an alternative, or resolve the matter through an appeal. If no action is taken within those 30 days, then the IRS may start the garnishment process.
There are only a few exceptions to this rule. Namely, if the IRS feels that collecting the tax is in jeopardy, they can move forward with a jeopardy levy where the 30-day notice is not required. The IRS also doesn’t need to give you advance notice in cases related to disqualified employment tax levies.
How Much Can the IRS Garnish From Your Paycheck?
The IRS is limited in the amount they can take from each paycheck, and this limitation is based on how much of your income is exempt from garnishment. Under the law, a specific amount of money will be exempt from garnishment based on your filing status and your number of dependents.
As an overview, a single filer without any dependents could exempt up to $1216.67 monthly from garnishment. Everything else they get paid outside of that is subject to IRS garnishment.
How to Prevent the IRS From Garnishing Your Wages
Responding to notices is the number one way to prevent the IRS from escalating their collection tactics to the point of garnishing your wages. You don’t have to worry about a wage garnishment if you proactively set up a payment plan or get into uncollectible status.
You can prevent wage garnishment by paying off your tax debt balance in full, negotiating your tax debt down to a more manageable level, requesting the removal of penalties, or requesting a payment plan with the IRS. Payment plans are the most common solution to tax debt because they allow you to make regular payments on your own accord over time. Rather than having a set amount withheld from your check, you’ll have the power to receive your money and then allocate it to the IRS. Payment plans don’t come without risk, though.
When does the IRS garnish wages if you stop making payments on an IRS installment agreement?
The first time you miss a payment, your installment agreement will be considered defaulted under the eyes of the IRS and the law. At that point, after giving you a short period of time to cure the default, the IRS has the authority to re-initiate any pre-existing wage garnishment orders that were in place. Since the garnishment was already in place before, it will be a much faster process for the IRS to start garnishing your wages again. In most cases, however, the IRS will let you resolve the missing payment to get the payment plan back on track as long as you do so within a month.
What Type of Payments Can the IRS Garnish?
When you owe the IRS, they can garnish any wages that aren’t considered exempt. Once the garnishment is in place and the exempt amount has been paid to you, the IRS is entitled to any bonuses you receive, commission payments, or fees you collect. If you collect Social Security payments, the IRS can also seize 15% of that income.
Other sources of income, like self-employment payments or disability income, can also be garnished, but the process of seizing payments from third parties varies a bit from the standard wage garnishment process. If you have more questions about your income and whether it’s subject to garnishment, then it might be best to talk one-on-one with a tax representative who can give you an accurate, personalized response to your questions.
Can You Stop an IRS Garnishment?
The most effective way to stop wage garnishment once it’s in place is to pay your taxes in full. However, in some cases, the IRS will stop the garnishment if you set up a payment plan and its terms dictate that the levy be released. In this case, you often have to make three satisfactory monthly payments before the agency removes the garnishment.
The IRS isn’t interested in penalizing taxpayers who are in genuine financial distress. If you’re experiencing financial hardship, then the IRS will stop the garnishment. By working with a tax lawyer, you can collect the right documentation to prove your financial situation to the IRS and get some much-needed relief in the form of being filed under “currently not collectible” status.
This will allow you the time to recover economically without the fear of facing collection efforts from the IRS. It’s important to understand, though, that this tax status doesn’t clear away your debt or remove your responsibility to pay it. The IRS will check in with you in the future to see if your financial situation has changed. If it has, then they might restart the collections process again.
Are You Ready to Talk to a Tax Resolution Attorney?
If you didn’t file your taxes or didn’t pay your tax bill, you should start receiving notices from the IRS about your delinquency. The IRS will also add interest and penalties to your account. Eventually, this will lead to garnishment if you continue to ignore the correspondence from the IRS.
The good news is that you can prevent wage garnishment, even if you’ve received a final notice of intent to garnish your income. In general, the IRS doesn’t want to take your paycheck. They’d prefer you to pay what you owe willingly. That said, it’s always possible to negotiate with the IRS and attempt to arrange an alternative payment option.
If you’re behind on your tax obligations, hiring a tax resolution lawyer to advocate for you might be best. The right attorney will help you find the best resolution option for your situation. Here at Wiggam Law, we have an entire team of highly qualified tax attorneys who are ready to help you find tax relief. Call us at (404) 233-9800 or fill out our online consultation form to schedule a meeting with us today.