As we mentioned, the IRS can use a tax levy to seize your property or assets to discharge your obligation. One such levy is the garnishment of your wages. However, before the IRS can just come in and take a portion of your paycheck, there are rules that they must follow. If you understand the process, you can prepare for a possible garnishment, but you also may be able to challenge it and stop the process.
Once the IRS accesses the tax that you owe, you will generally be served with a notice and demand for payment. This demand will include the amount of funds due. If you choose not to pay this demand or are unable to do so, you will receive a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing. These two documents are sent at least 30 days prior to the IRS beginning to garnish your wages.
This is one opportunity to stop the process before it truly starts. Contact the IRS when you receive the Demand for Payment and attempt to set up a payment arrangement. Also, you may qualify for forgiveness of your back taxes, which could include a reduction in the amount owed. Check with your tax professional about any programs available that might fit your circumstances.
So how much can the IRS garnish from your wages? The IRS has more power than traditional creditors and can therefore not be limited by typical state and federal limitations on how much you can take each pay period. Therefore, the IRS can take a majority of your paycheck until the obligation is discharged. However, the actual amount of your garnishment will depend in a large part on how much you owe in back taxes.
If you cannot reach an agreement with the IRS for an alternative payment arrangement, the number of circumstances that require the IRS to cease wage garnishment prior to the balance being fully paid off is limited. Below are a few of these circumstances:
One item to note is that you can always request an appeals conference during your initial 30-day response period after the receipt of your final notices. This appeals process is often known as the Collections Due Process (CDP) hearing. The CDP hearing is not the place to dispute the amount of tax owed. Instead, this is where you appeal on issues relating to the garnishment itself. The CDP is also the forum where you can point out any rule violations by the IRS itself within the garnishment process. Your opportunities to dispute the tax amount itself have typically been exhausted long before you reached the stage of having received a Final Notice from the IRS.
So what are your options? The first one is that as soon as you receive notice from the IRS, call your tax professional who completed the filing for the year in dispute. Then you should both work to contact the IRS and try to determine if there were any errors that might affect the amount of taxes due. Finally, you should then work to set up a payment arrangement with the IRS. By following through on the payment plan, you can avoid the possibility of a wage garnishment.
