How to Stop Wage Garnishment
No matter what kind of debt you have; mortgage debt, car payments, credit card debt, student loans or any other type of payment obligation, it’s never something you look forward to paying every month. But unfortunately, if you fail to pay your debt, you just may find your wages garnished.
- What is Wage Garnishment?
- Why Would My Wages Be Garnished?
- Ways to Stop Wage Garnishment
- IRS Garnishment Help: An Offer in Compromise Agreement
What is Wage Garnishment?
If you owe money to the IRS, one of the most common methods that the IRS uses to collect your unpaid debt is wage garnishment. Aptly named, a wage garnishment is the seizing, or garnishing, of your income, or wages, to offset your debt amount.
Why Wage Garnishment Happens
When you’ve left an IRS debt unpaid for too long, the IRS will resort to forcibly removing your funds to pay back their debt through wage garnishment. Wage garnishments are levy actions by the federal government to collect an unpaid tax debt. Wage garnishment laws for the IRS are different from other collectors, because they do not require federal court ruling to begin collection actions. They have the full authority to act on behalf of the federal government.
Wage garnishment does not come out of the blue. When a taxpayer owes back taxes, the IRS takes considerable steps to notify the taxpayer of their debt, inform them of their options, and attempt to resolve the debt amicable. The IRS only has the authority to enforce a wage garnishment if a taxpayer has failed to respond to the IRS with a full repayment of debt or an appeal for a payment negotiation.
If a taxpayer continues to ignore these notices, the IRS will place a lien on their accounts. A lien is a right to keep possession of property belonging to the taxpayer until their debt is fully paid. Once a lien is placed on the taxpayers’ accounts, the IRS has the right to begin the wage garnishment process.
How Wage Garnishment Works
- When the IRS begins to garnish your wages, they first issue a wage garnishment notification to your employer. Your employer is then legally obligated to siphon a designated portion of your paycheck to the IRS for repayment. The IRS will typically take at least a quarter of your income. While the IRS will take your current financial situation into consideration, they, they are not held responsible for the bills you have to pay, and they make little consideration if you are self-employed. In fact, if you have a spouse, he or she may have been affected if you have decided to file jointly. It is harder to stop wage garnishment and other levy actions after they have been issued. The IRS is only required to leave a single taxpayer who is filing as single $ 845 a month as a “minimum living requirement”. Any income over that amount is available for them to levy. For married individuals, the amount is $ 1362 per month.
- If your earnings are garnished to pay your debts, that garnishment is considered by federal income tax purposes. That being said, the amount garnished is income and will be reported as wages on your federal income tax return. The bottom line is that even though this money never made it into your bank account, wage garnishment is 100% taxable. This is just another reason to stop wage garnishment from happening.
- The best way to stop IRS garnishment from being issued is to respond to the IRS right away. If you fail to respond to the demand for payment for a tax liability, the IRS may garnish your wages.
- The professionals at Community Tax have worked with many clients who have suffered by having their wages garnished by the IRS. In many cases, our tax resolution team is able to help these individuals stop wage garnishment and enter a tax resolution plan. A tax resolution plan allows you to pay to the capacity of your ability-it can mean a halt to a wage garnishment and a negotiation for a payment plan that will keep you financially stable. Negotiating with the IRS to halt a levy requires extensive financial documentation and firm evidence that the levy is causing undue hardship, the tax debt was assessed incorrectly, the statute of limitations will expire on the debt, or you can make an offer for another payment plan that the IRS accepts. Our team has extensive knowledge of IRS wage garnishment laws and can help you understand available options.
Why Would My Wages Be Garnished?
Wage garnishment is used to pay any number of debts, such as:
- Unpaid local, state and federal taxes
- Unpaid child support
- Unpaid student loans
- Unpaid private creditors
By law, most creditors must go to court in order to garnish your earnings, but some government (ie: money owed to the IRS), do not require a court order.
Ways to Stop Wage Garnishment
The only way to solve the issue of an IRS wage garnishment is to confront it and get the tax debt resolved
Pay off the debt completely
The most obvious way to stop wage garnishment is, of course, to pay off your debt entirely. This doesn’t only include your owed debt amount, but also includes any penalties and interest you’ve incurred while your debt has remained unpaid.
For many indebted taxpayers, however, paying off debt in full simply isn’t possible. More often than not, taxpayers get into debt due to lack of funds in the first place. Most then struggle to pay back the debt amount plus the additional fees associated with the length of their debt. For that reason, there are other solutions to halt wage garnishment.
Set up an installment agreement
For taxpayers who are unable to pay their debts in a lump sum, an IRS installment agreement is a go-to tax relief program. An installment agreement allows taxpayers to pay off their debt in small payments over the course of up to 3 years. The key is to show that you have not been negligent on previous debts, indicating that you are responsible and will agree to pay the monthly payment in full-and most importantly, on time.
Note that, you’ll still continue to incur penalties and fees until the debt is fully paid off, but as your debt shrinks, so will the cost of the fees.
Negotiate with the IRS to pay less than you owe
The IRS offers a number of other programs through the IRS Fresh Start Initiative for debt repayment. One of those is a program known as an Offer In Compromise. Essentially, you can negotiate with the IRS to settle your debt for less than the actual amount that you owe. We’ll go into depth on this later.
Tax hardship is another option for taxpayers who simply cannot afford their tax debt. If paying off your debt amount would cause you financial hardship (ie make it impossible for you to afford your basic needs), then you may qualify for the IRS hardship program. Once you qualify, you will be placed into “Currently Not Collectible” status with the IRS. As long as you remain uncollectible, the IRS cannot take any steps to collect on your debt.
While the tax hardship program can certainly buy you time, it will never erase your debt entirely. You will continue to collect penalties and interest while in CNC status. Additionally, the IRS will review your CNC status on a regular basis to ensure you still qualify.
In some cases, filing for bankruptcy will stop wage garnishment. As soon as you file for bankruptcy, a “stay” will go into effect that prevents the garnishing of your wages. Your case will then need to be reviewed by a bankruptcy court. They’ll review your debt and designate whether or not your IRS debt will be discharged. If it is, the IRS will not be able to garnish your wages.
Note that bankruptcy will not prevent wage garnishment if your debt is associated with child support.
Get professional help
Our Community Tax experts include a team of tax attorneys, enrolled agents, and certified public accountants who are experts at tax resolution to give our clients the help they need to move forward. Our licensed experts have already helped taxpayers across the nation get the help they need to settle a deal to solve issues associated with tax debt and back taxes. The members of our team have a diverse range of experience and come from across the country with a passion to help those in trouble with the IRS, whether they seek federal or local tax debt relief. Our team has saved millions of dollars for our customers in total, and we would like to continue by helping you.
- Our tax professionals have years of experience with clients of every financial background. We will help you every step of the way, from organizing your financial and tax information, to appealing on your behalf before the IRS and negotiating a plan that works best in your favor. We have a passion to help our clients out of every financial pitfall, whether it is minor or severe. Do not go it alone – our tax professionals and other experienced staff will aid you at every turn.
- Those who have never worked with a tax professional before may wonder if they should hire one now. After all, is it worth the investment? However, it is important you stay in tune with your financial situation. You can prevent severe penalties on behalf of the IRS by reaching out before a notice even arises. It is likely that you are already aware of your ability to pay off tax debt before the IRS contacts you. Contact us now to prevent accruing penalties and interest that can worsen your situation.
- However, if you already find yourself stuck with a notice by the IRS, there is no need to panic. You may not yet be equipped with the financial tools to move forward, but our tax professionals are more than qualified. Note that when you receive any notice from the IRS, it is in your best interest to respond immediately. The IRS makes a great effort to warn you well ahead of the lengths they will take to receive your tax payment in full as soon as possible. However, if you respond appropriately, they are likely to work with you. After all, they want as much of their owed money as they can get; in most cases, they do not want to resort to the final blow of a levy and garnishment on your wages and assets. However, make no mistake: they will take action if you refuse to respond with an application to negotiate.
IRS Garnishment Help: An Offer in Compromise Agreement
An offer in compromise is granted by the IRS in the case that you can not afford to pay the full amount, without suffering severe financial difficulties. While it is one of the most difficult to obtain from the IRS, if they determine that this is the best course of action, they will be willing to settle for a lesser amount. In order to qualify for an offer in compromise, the IRS demands that you provide, in great detail, all aspects of your financial situation.
What is an OIC?
- Not sure if you can afford to take care of your total tax debt, even if you did make monthly payments? You may qualify for an offer in compromise. An offer in compromise is a statement of permission allowed by the IRS to pay off less debt than you owe. If the IRS recognizes that it is simply unrealistic for you to pay off the full amount, then they might agree to an offer in compromise. There can be any number of legitimate reasons why a taxpayer may be given an offer in compromise by the IRS. Most people who qualify in this category are currently in a financial situation where they cannot afford the payment, indicating a severe financial hardship. The IRS is willing to take into consideration many financial factors, including your income, asset equity, ability to pay, and your required expenses in order to live.
- The IRS will usually grant an offer in compromise when they surmise that the total amount of tax debt cannot be collected within a realistic time frame. It is critical that a professional sit with you and carefully comb through all possible payment options before submitting the paperwork for an offer in compromise. Our qualified tax experts at Community Tax have the finesse to go through every detail and we will help you determine if this is the best option for you.
- With the wide variety of payment options available, it can be difficult to ascertain which route is best suited to your situation. You can reduce your financial burden by thousands of dollars or manage your payments in a way that doesn’t warrant the severe stress and depression that can follow financial hardship. All agreements require that you file all taxes, past and present, and the promise to pay what you owe in the time you agree every month. Remember that different compromises entail different requirements that may have strings attached, such as whether creditors will be notified.
Get Tax Help from Community Tax
If you’re facing wage garnishment, it’s important to remember that you do not need to go at it alone. Our team of tax professionals, including tax attorneys, enrolled agents, and CPAs are well equipped to prepare you for the road ahead. In addition, our experts are granted unlimited rights by the IRS to represent you before the IRS. It can not get any easier than that-never fear that you are inexperienced and inadequate to the IRS, because we can give you the confidence by representing you.
Our tax professionals are here to solve your tax issues. Call us today for more information about how to stop IRS garnishment, levy actions and get out of tax debt.