Overview of IRS Wage Garnishment Rules

IRS wage garnishment involves the Internal Revenue Service (IRS) legally withholding a portion of your wages to collect unpaid federal taxes. This process, formally known as a tax levy, is one of the IRS’s key collection tools when taxpayers fall behind on their tax obligations. Understanding how it works and the protections available to you can help prevent unexpected financial hardship.

How the IRS Initiates Wage Garnishment

When you owe back taxes, the IRS first attempts to collect through notices and demands for payment. If you ignore or fail to pay, the IRS may take more serious action:

  1. Final Notice of Intent to Levy: At least 30 days before garnishment, the IRS sends a written notice called the “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” This letter informs you of the IRS’s intent to garnish wages and your right to request a hearing to dispute the levy.

  2. Employer Notification: If there is no response or payment arrangement, the IRS sends a wage garnishment order to your employer requiring them to withhold a portion of your pay.

  3. Withholding of Pay: Your employer is legally obligated to comply and remit the garnished amount directly to the IRS until your tax debt is fully paid or resolved.

Calculating the Garnishable Amount

The IRS does not seize your entire paycheck. It uses a formula based on your filing status, number of dependents, and allowable deductions to determine an “exempt amount”—the minimum amount you need to cover basic living expenses. Only wages exceeding this exempt amount are garnished. For example:

Filing Status Weekly Income Exempt Amount Garnishable Amount
Single, no dependents $700 $500 $200
Married, two dependents $1,200 $900 $300

This system ensures that garnishment only collects funds beyond your essential living costs.

Who Is Subject to IRS Wage Garnishment?

Any taxpayer who owes federal taxes and does not arrange payment or successfully dispute the debt can face wage garnishment. Self-employed individuals are not immune; the IRS can garnish payments made to them or other forms of income including bank accounts or social security benefits.

How to Protect Your Paycheck from Garnishment

  • Respond Promptly to IRS Notices: Ignoring IRS communications can accelerate garnishment actions.
  • Set Up a Payment Plan: The IRS offers installment agreements allowing you to pay back taxes over time.
  • Offer in Compromise: Qualify to settle your debt for less than owed under certain financial hardship conditions.
  • Request a Hearing: You can challenge a levy if you believe it to be unjust or causing undue hardship.
  • Request an Exempt Amount Review: If your financial circumstances change, you can ask the IRS to re-evaluate how much of your wages should be protected.

Common Misconceptions About IRS Wage Garnishments

  • Your Employer Decides Garnishment Amount: Incorrect. The IRS dictates the amounts; employers must comply.
  • Garnishment Happens Without Warning: False. The IRS must send formal notices first.
  • The Entire Paycheck Will Be Taken: No, only amounts beyond your exempt living expenses are garnished.
  • Partial Payments Stop Garnishment: Garnishment continues until full payment or approved arrangements are made.

Real Life Scenario

Jane stopped responding to IRS letters about her tax debt. Consequently, the IRS notified her employer to garnish $150 from her weekly $900 paycheck. After this started, Jane contacted the IRS to set up a payment plan, which stopped further withholding and allowed her to manage her debt responsibly.

Tips for Managing IRS Wage Garnishment

  • Keep all IRS correspondence and employer communications organized.
  • Consult with a tax professional or IRS advocate for assistance.
  • Budget rigorously to maintain essential expenses during garnishment.

Frequently Asked Questions

Can the IRS garnish income besides wages?
Yes, the IRS can levy bank accounts, social security benefits, and other income sources.

How long will garnishment last?
Garnishment continues until your tax debt is fully paid or a payment agreement is in place.

Can I negotiate the garnished amount?
You may request a reassessment of your exempt amount if you face financial hardship.

Sources

Understanding IRS wage garnishment rules empowers taxpayers to respond appropriately and safeguard their financial well-being while resolving tax liabilities.