When you owe a creditor, there are many ways your debt can be collected. Back taxes are a type of debt and the IRS can collect the amount you owe in different ways, including multiple types of levies. Can the IRS garnish wages in an attempt to collect tax debt? The answer is yes.
Who Can Garnish Your Wages?
There are many reasons creditors, including the IRS, can garnish wages. Employees who owe back taxes, student loans, child support, alimony, or consumer debt (such as credit card debt, medical bills, or personal loans) can be subject to wage garnishment. In most cases, a creditor must sue you for the unpaid bills and win in court in order to garnish your wages. However, the IRS is not a typical creditor.
IRS Wage Garnishment
Before the IRS can garnish your wages, salaries, commissions, or bonuses, it will attempt to collect your tax debt by demanding you pay your back taxes. If you cannot pay the bill outright, it’s time to explore other payment options, such as an installment agreement. When you enter into an installment agreement or otherwise negotiate with the IRS to address your tax debt, the IRS pauses enforced collection activities. If you do not address the IRS’s request for payment, the agency can take more aggressive action to collect the debt you owe, such as wage garnishment.
How Much Can the IRS Garnish?
Unlike other creditors, the IRS is not subject to state or federal limitations on wage garnishment. Instead, the IRS uses a matrix called Publication 1494 to help your employer determine how much of your wage you’ll see in your paycheck. The amount the IRS allows you to keep depends on your:
- Filing Status (Single, Head of Household, Married Filing Joint Return, or Married Filing Separate Return)
- Number of Dependants (One, Two, Three, Four, Five, or More Than 5)
- Pay Period (Daily, Weekly, Biweekly, Semimonthly, or Monthly)
Your answers to these questions, which you will provide to your employer on a Statement of Dependents and Filing Status, determine where you fall on the IRS’s matrix. Any additional wages, salaries, commissions, or bonuses from your employer will be sent to the IRS to pay your tax debt.
Stop Wage Garnishment
IRS wage garnishment continues until you meet one of three criteria:
- You pay off your tax debt through wage garnishment or other repayment methods.
- You arrange with the IRS to pay your tax debt another way.
- Your tax levy is released after reaching the end of the period of collection or causing economic hardship. There are a number of other reasons your tax levy may be released as well.
If you are currently experiencing IRS wage garnishment, or are facing the prospect of the IRS garnishing your wages, it’s time for professional help. The tax resolution specialists at East Coast Tax Consulting Group can help you resolve your tax problems. Contact us today.