Wage Garnishment by the IRS: Process and Taxpayer Protections

Overview

A wage garnishment by the IRS is formally called a wage levy. It’s one of the strongest collection actions the IRS can take because it collects directly from your employer. The levy continues until the tax debt is paid, is legally resolved (for example via an Offer in Compromise), or the collection statute of limitations expires (generally ten years from assessment) — the Collection Statute Expiration Date (CSED) — although exceptions can extend that period (IRS). Interest and penalties continue to accrue while the levy is in place.

This article explains the timeline the IRS follows, how much the agency can take, the notices and hearing rights you retain, employer obligations, practical ways to stop or limit garnishment, and common relief options.

How the IRS starts a wage levy — the typical timeline

1. Notices and outreach: The IRS sends multiple notices explaining the unpaid taxes and requesting payment. Early notices commonly include balance-due letters and final demand letters. These notices give you the chance to pay or to contact the IRS to resolve the account.

2. Final Notice of Intent to Levy and Right to a Hearing: Before the IRS issues a levy, it sends a formal “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” After that notice, you have 30 days to request a Collection Due Process (CDP) hearing or an Equivalent Hearing (for certain types of liabilities). If you do not request a hearing within the 30-day window, the IRS can proceed with a levy (IRS — Collection Due Process).

3. Levy issued to employer: If you don’t resolve the debt or request timely review, the IRS sends a Notice of Levy (Form 668-W) to your employer or payer. The employer must begin withholding the non-exempt portion of your disposable pay and send it to the IRS as directed.

4. Ongoing withholding: The employer continues to send withheld funds to the IRS until the debt is satisfied, the levy is released, or a collection alternative is put in place.

Authoritative sources: See the IRS pages on levies and CDP rights for the exact wording and steps (IRS). The taxpayer advocate and IRS notices explain these timelines in detail.

How much can the IRS garnish?

The amount that can be withheld is limited by federal law. For most wage garnishments the maximum is the lesser of:

• 25% of your disposable earnings (your pay after legally required deductions), or
• The amount by which your weekly disposable earnings exceed 30 times the federal minimum wage.

This standard comes from the Consumer Credit Protection Act and applies to most wage garnishments; the IRS follows these protections when calculating exempt amounts (CFPB; U.S. Department of Labor). Exact withholding depends on filing status, pay frequency, the number of dependents or allowances claimed, and other required deductions.

Note: Certain obligations (for example, child support) have different priority rules and may yield different deduction limits. When multiple levies or garnishments exist, federal and state laws determine priority.

Employer responsibilities and timing

When served with Form 668-W (Notice of Levy on Wages, Salary, and Other Income), employers must comply and start withholding beginning with the first pay period after they receive the levy. Employers who fail to comply can face penalties and may be liable for amounts they should have withheld. Employers also typically provide the employee notice of the levy and may be asked to calculate exempt income amounts.

If you change jobs after a levy is issued, the levy remains valid until it’s released. A new employer can be served with the same levy.

Taxpayer rights and protections

1. Right to a hearing: You have 30 days from the Final Notice of Intent to Levy to request a Collection Due Process (CDP) hearing. During a CDP hearing you may:

• Propose an installment agreement,
• Request Currently Not Collectible (CNC) status based on financial hardship,
• Submit an Offer in Compromise (OIC),
• Argue that the levy is causing economic hardship, or
• Raise alternative collection issues (e.g., identity theft, wrongful levy).

If you timely request a CDP hearing, the IRS must generally refrain from levying until the hearing is resolved.

2. Hardship (Currently Not Collectible): If the levy prevents you from meeting necessary living expenses (rent/mortgage, utilities, food, medical), you can provide financial information and request CNC status. In CNC status the IRS suspends collection activity for a time, though penalties and interest continue to accrue. CNC review is based on a financial statement and supporting documentation.

3. Installment agreements and alternative payment plans: Entering a formal installment agreement with the IRS stops a levy when the IRS accepts the agreement and typically issues a release. Streamlined installment agreements may be available for smaller balances; Partial-Payment Installment Agreements (PPIAs) are an option when you cannot afford full monthly payments. For step-by-step guidance on setting up payment plans, see our piece on negotiating an installment agreement online with the IRS and the guide on Partial-Payment Installment Agreements.

• How to negotiate an installment agreement online with the IRS: https://finhelp.io/glossary/how-to-negotiate-an-installment-agreement-online-with-the-irs/
• How to Request a Partial Payment Installment Agreement (PPIA): https://finhelp.io/glossary/how-to-request-a-partial-payment-installment-agreement-ppia/

2. Offer in Compromise (OIC): In limited cases where paying the full tax debt would create a financial hardship and the IRS determines the offer reflects the most it can collect, an OIC can resolve the debt for less than the full amount. OIC submissions require complete financial disclosure.

3. Bankruptcy protections: Filing for bankruptcy can automatically stay IRS collection actions, including levies, but tax consequences vary by the type of tax and the age of the debt. Consult a bankruptcy attorney and tax professional before taking this route.

Practical steps to take immediately after receiving a levy notice

1. Read every IRS notice carefully and note the date. The 30-day CDP window starts from the Final Notice — act fast.
2. Gather proof of income, expenses, and bank statements. The IRS will need this for CNC requests, PPIA applications, and CDP hearings.
3. Contact the IRS Collection Department to ask about installment agreements or to verify the balance. Document every call and the name of the IRS representative.
4. Consider hiring a tax professional (CPA, enrolled agent, or tax attorney). A representative can request a collection hearing on your behalf and negotiate terms.
5. If the levy already started, ask the IRS to release it while you pursue a resolution—explain the hardship and submit financials.

Common mistakes to avoid

• Ignoring notices — silence usually leads to a levy.
• Waiting past the 30-day CDP period — missing the window removes a key protection.
• Failing to provide complete financial documentation when requesting hardship relief or a PPIA.
• Assuming the levy can’t be released — many levies are released once a payment plan or other agreement is in place.

When garnishment ends

A wage levy ends when the tax debt is paid in full, when a negotiated resolution (installment agreement accepted, OIC approved) is in place, when the IRS restores non-collectible status, or when the CSED is reached and no extensions apply. If you believe the IRS wrongly levied your wages, you can pursue appeals and, if necessary, sue in Tax Court following the administrative process.

Examples from practice

In my experience advising clients, timely response matters. One client who called the IRS within ten days of a Final Notice avoided a levy by entering a short-term installment agreement. Another client did not act and had 20% of take-home pay withheld for months; once we submitted complete financials and negotiated a PPIA, the levy was released and a lower monthly payment was set.

These outcomes illustrate the range of IRS options when taxpayers engage early and provide accurate documentation.

Useful official resources

• IRS — Levies: https://www.irs.gov/businesses/small-businesses-self-employed/levies
• IRS — Collection Due Process (CDP) rights: https://www.irs.gov/advocate/collection-due-process-cdp-hearings
• CFPB — Wage garnishment rules: https://www.consumerfinance.gov/ask-cfpb/what-are-the-rules-on-wage-garnishment-en-1790/

Final notes and disclaimer

This article explains commonly available protections and procedural steps for dealing with an IRS wage levy. It is educational and does not replace personalized legal or tax advice. Tax situations vary; consult a qualified tax professional (CPA, enrolled agent, or tax attorney) for advice tailored to your circumstances.

If you’re facing a levy now, gather documentation and contact either the IRS or a tax professional immediately — acting within the notice windows usually creates the most options for stopping or limiting wage garnishment.