It is no secret that the IRS has ways of making you pay for delinquent tax debts—one of which is through wage garnishment.
What is Wage Garnishment
Wage garnishment is a mechanism the IRS uses, which involves taking a portion of your paycheck to repay overdue tax debt. This scenario can be a real problem if you’re a low-income earner. The good news, however, is that there are ways to prevent the IRS from taking money out of your paycheck.
Interested in learning more? Read on as the next section discusses how the IRS garnishes wages.
How will the IRS Notify You About the Wage Garnishment
Can the IRS garnish wages? The short answer is yes. Wage garnishment is when the U.S. government takes money from your paycheck to pay off a debt, like back taxes or student loans.
It doesn’t happen overnight; usually, it’s the result of ignoring a series of IRS notices to pay tax balances.
CP14 – Balance due
The first notice you’ll receive from the IRS is a CP14 Notice. It notifies you of your delinquent debt and the possibility of wage garnishment. The notice gives you a specific date to respond and pay the amount you owe in full or by a payment plan.
CP501 – 1st Notice
The CP501 Notice (also known as the first notice) is a letter you receive when your taxes are under audit. The IRS sends this notice by mail, usually around the time you typically file your taxes if you haven’t already filed them.
CP503 – 2nd Notice
CP503 is a notice you receive from the IRS after not responding to the previous CP501 notice.
CP504 – Notice of Intent to Levy
The CP504 notifies you that the IRS intends to impose a levy on your paycheck, bank account, or other property because you have not paid your tax dues. The notice will indicate that you will have 30 days to arrange something with the IRS, and the garnishment will proceed 15 days after the deadline.
LT11 Notice or Letter 1058 – Final Notice of Intent to Levy and Notice of Your Rights to a Hearing
Receiving LT11 or Letter 1058 means only one thing: the IRS now has the legal right to seize your assets to pay off your debt. Apart from losing your assets, you might also have your passport revoked under the Fixing America’s Surface Transportation (FAST) Act.
Keep in mind the IRS cannot proceed with the garnishment without this letter. Suppose the IRS garnished your wages without issuing this letter. You could then contest this as a violation of due process.
7 Options to Stop the IRS from Garnishing Your Wage
Pay off your debt in full
The simplest solution to this problem is by paying the total amount of the debt at once, plus interest and penalties. However, that is easier said than done most of the time. If you cannot come up with the funds to pay off the debt, there are still other courses of action to explore, as we will detail below.
Appeal the garnishment
If you think the IRS may have committed a mistake with your account, you can appeal the agency’s decision within 30 days of receiving the Notice of Intent to Levy. Some objections you can make are:
- The debt has already been paid in full
- The debt has an expired statute of limitation
- An error was made during the tax assessment process
- You are actively filing for bankruptcy
- You qualify for the innocent spouse relief
Enter into an installment agreement
Another way to stop wage garnishment is to request a payment plan. Negotiating an installment agreement with the IRS can be a great way to pay your tax bill without paying it all at once and without risking penalties.
You have to make sure you have enough money to pay the first payment and don’t miss any deadlines because it will be considered a failure and could lead to additional penalties.
Make an offer in compromise
Making an offer in compromise (OIC) with the IRS can reduce your tax debt. However, the eligibility for this program is tight.
The following are some of the criteria to be eligible for an OIC:
- You’ve filed all required tax returns
- You’ve paid all the required estimated tax payments for the current year
- You are not in an open bankruptcy proceeding
- You have a valid extension for a recent year’s return
- If you’re an employer, you should have made tax deposits for the current and past two quarters
Declare financial hardship exemption
The IRS offers a financial hardship exemption for taxpayers unable to pay their taxes in full. However, you’ll have to prove your non-collectible status due to hardship. Here, the IRS will use the information you’ve provided on Forms 433A, 433B, or 433F to determine whether the account is eligible for tax hardship.
File for bankruptcy
The first thing to understand is that you can discharge some of your tax dues through bankruptcy. If you file for bankruptcy, the IRS will not be able to garnish your income once your bankruptcy case concludes. However, this does not mean that your tax debt will simply disappear.
If you are eligible for a discharge of your federal tax debt, then the government may still pursue collections against you for unpaid state taxes (if applicable). Bankruptcy filing should be the last resort since it will severely damage your credit score.
Seek help from a tax resolution company to stop a wage garnishment
If you’re struggling to manage your tax issues with the IRS, then it may be time to get help from a tax resolution company that offers tax negotiation services.
Tax resolution companies specialize in helping people resolve their tax issues, often by reducing or eliminating penalties and interest rates and negotiating payment plans. They’ll work with you individually to develop a plan that works for your situation and can also help you avoid IRS’s legal action.
Drowning in Taxes
The need for tax management is clear. You could run into many problems if you don’t manage your taxes correctly and on time. Since it can be challenging to handle taxes, you shouldn’t hesitate to approach a tax resolution company.
If you have a tax problem, such as wage garnishment or levy and need an expert to help you settle the issue, reach out to us at Peace of Mind Tax Help. Our team of leading experts in tax negotiation and mediation can help you minimize your tax liability.