Overview

Wage garnishment for tax debts (often called a wage levy) is one of the IRS’s strongest collection tools. It directs an employer to send part of your disposable earnings to the tax authority until the debt is paid or the levy is released. Acting quickly after the IRS issues a Notice of Intent to Levy can preserve more of your take-home pay and open relief options.

How garnishment is calculated

  • Step 1 — Determine disposable earnings: start with gross pay then subtract legally required deductions (federal income tax withholding, Social Security, Medicare, and similar statutory items). Voluntary deductions (retirement, health insurance) do not reduce disposable earnings for levy limits.
  • Step 2 — Use the legal limits: for most consumer garnishments the Consumer Credit Protection Act caps collections at the lesser of (a) 25% of disposable earnings, or (b) the amount by which disposable earnings exceed 30 times the federal minimum wage for the pay period. The IRS follows similar rules and publishes exemption tables in Publication 1494 to compute how much of each paycheck is protected (IRS Publication 1494) (https://www.irs.gov/pub/irs-pdf/p1494.pdf).

Example (simple):

  • Weekly gross pay: $800
  • Legally required deductions: $100 → Disposable earnings = $700
  • Exempt amount (30 × $7.25) = $217.50
  • Amount subject to garnishment = $700 − $217.50 = $482.50
  • 25% of disposable earnings = $175.00
  • Levy amount = lesser of $482.50 and $175.00 = $175.00

Note: the IRS also issues tables that reflect the exemption amount by pay period (weekly, biweekly, semimonthly, monthly) — see Publication 1494 for the exact figures (https://www.irs.gov/pub/irs-pdf/p1494.pdf). State-level garnishment rules or higher state minimum wages do not change the federal formula used for CCPA caps but can affect non-tax creditor garnishments.

IRS-specific procedures and taxpayer rights

  • The IRS must generally send a Notice of Intent to Levy and a Notice of Your Right to a Hearing before a levy begins. Taxpayers may request a Collection Due Process (CDP) hearing (Form 12153) or an equivalent hearing to dispute the levy or propose alternatives (https://www.irs.gov/appeals/collection-due-process-cdp-rights).
  • To ask the IRS to stop a levy for financial hardship, submit a collection information statement (Form 433-F or the business/individual equivalent) and explain inability to pay. If the IRS accepts that you are currently unable to pay, it may place the account in Currently Not Collectible status (CNC) (https://www.irs.gov/payments/offer-in-compromise).

Relief options — practical steps that often stop garnishment

  1. Installment Agreement: Setting up a payment plan is often the fastest way to stop a wage levy once the IRS accepts and the plan is established. You can apply online for many types of agreements (https://www.irs.gov/payments/online-payment-agreement). (See our guide: “Setting Up an Affordable Installment Agreement with the IRS”.)
  2. Offer in Compromise (OIC): If you cannot pay the full amount, an OIC lets qualifying taxpayers settle for less than the balance owed. OICs require full financial disclosure and are evaluated for reasonableness (https://www.irs.gov/payments/offer-in-compromise). See our article: “When an Offer in Compromise Is Better Than an Installment Agreement.”
  3. Currently Not Collectible (CNC): If you have no reasonable means to pay (extreme hardship), the IRS may place your account in CNC status, temporarily halting active collection like wage levies. This requires detailed financial documentation (Form 433-F or 433-A as applicable).
  4. Collection Due Process (CDP) or Appeal: File Form 12153 to request a hearing; you can propose an installment plan or OIC in that hearing and request a levy release while the appeal is pending (https://www.irs.gov/appeals/collection-due-process-cdp-rights).
  5. Emergency relief: If a levy would deprive you of basic living expenses, contact the IRS immediately and request a release for hardship. In my practice I’ve seen levies released within days when evidence shows the taxpayer cannot meet essential expenses.

Useful forms and pages (IRS):

For general consumer guidance on garnishment rights see the Consumer Financial Protection Bureau (CFPB) overview (https://www.consumerfinance.gov/consumer-tools/debt-collection/): the CFPB explains limits, employer rules, and steps for relief.

Common mistakes and practical tips

  • Don’t ignore the first notices. Filing for an installment agreement or requesting a hearing early often prevents employer levies.
  • Collect and organize documentation up front: recent pay stubs, bank statements, and a completed Form 433-F will speed negotiations.
  • If you receive a levy, contact the IRS collections office shown on the notice and confirm the employer’s deadline to respond — delays can sometimes stop the first payment. In my experience representing taxpayers, proactive, documented communication shortens the time to lift a levy.

When to consult a professional

If your situation involves large balances, complex income sources, or potential bankruptcy, talk to a tax attorney, Enrolled Agent, or CPA experienced in collections. They can file appeals, negotiate OICs, or prepare accurate financial statements that the IRS will accept.

Internal resources

Disclaimer

This article is educational and does not substitute for personalized tax advice. Rules and procedures can change; verify current IRS guidance and consult a qualified tax professional for decisions about your situation.