The federal government must leave you with 25% of your disposable earnings, or the amount your earnings are greater than 30 times the federal minimum wage. Anything beyond that is up for garnishing. For IRS wage levies, the exempt amount depends on IRS guidelines, filing status, dependents, and pay period. Consulting with a tax professional to understand your IRS wage garnishment or levy could help you understand exactly how much may be taken.

The primary way to solve the issue of an IRS wage garnishment is to confront it and get the tax balance resolved.

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.

Filing a claim of exemption to address wage garnishments is a crucial step if you’re facing financial hardship. A wage garnishment can significantly impact your financial situation, as it involves court-ordered deductions from your paycheck to pay off debts.

Certain income types are considered protected income exempt from garnishment, including Social Security retirement benefits, VA benefits, certain types of alimony or spousal support, and public assistance payments. If you receive these forms of protected income, be sure to highlight them in your exemption claim.

Moreover, if you qualify as the head of household and have dependents, you may have additional protections. This status can strengthen your claim for exemption by showing that your income is essential for supporting your family. Filing the claim usually requires submitting it to the court that issued the wage garnishment, often accompanied by supporting documentation to verify your income and financial obligations. If granted, the exemption may reduce or eliminate the wage garnishment.

The most obvious way to stop wage garnishment is, of course, to pay off your tax owed entirely. This includes your tax amount owed as well as any penalties and interest you’ve incurred while your tax owed has remained unpaid.

For many indebted taxpayers, however, paying off taxes owed in full simply isn’t possible. More often than not, taxpayers get into tax owed due to lack of funds in the first place. Most then struggle to pay back the owed amount plus the additional fees associated with the length of their tax liability. For that reason, there are other solutions to halt wage garnishment.

For taxpayers who are unable to pay their tax owed in a lump sum, an IRS installment agreement is a go-to tax relief program. An installment agreement allows taxpayers to pay off their tax owed in small payments over a certain amount of years, depending on the taxpayer’s situation. The key is to show that you have not been negligent on previous owed tax, and prove you are responsible and 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 owed tax is fully paid off, but as your owed tax shrinks, it is likely the cost of the fees could reduce, as well.

The IRS offers a number of other programs through the IRS Fresh Start Initiative for tax balance repayment. One of those is an Offer In Compromise, which 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 may 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.

If paying off your owed tax amount would cause you financial hardship (i.e. make it impossible for you to afford your basic needs), then you may qualify for the IRS hardship program. While the tax hardship program can certainly buy you time, you’ll continue to collect penalties and interest while in CNC status. The IRS continually reviews your CNC status to ensure you still qualify.

In some cases, filing for bankruptcy can start a stay of collection actions, including wage garnishment. When filing for Chapter 7 bankruptcy, wage garnishment may stop if a bankruptcy district court reviews your owed taxes and designates that your IRS balance could be discharged. This is not a guaranteed stop to wage garnishments or a proven way to discharge tax debt. Expect bankruptcy to impact your credit score significantly.

Note that bankruptcy may not prevent wage garnishment if your owed tax is associated with child support.

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 taxes owed, inform them of their options, and attempt to resolve the amount amicably. Wage garnishment is used to pay any number of unpaid balances, such as:

• Unpaid local, state, or federal taxes
• Unpaid child support
• Unpaid federal student loans
• Unpaid private creditors

By law, most creditors must go to court in order to garnish your disposable earnings, but some government liens (i.e. money owed to the IRS or federal student loans), do not require a court order. The IRS has the authority to enforce a wage garnishment if a taxpayer has failed to respond to the IRS with a full repayment of tax owed or an appeal for a payment negotiation. Unpaid taxes and federal student loans can actually be enforced without a court order. They have the full authority to act on behalf of the federal government.

When the IRS begins to garnish your disposable earnings, 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 often takes at least a quarter of your disposable income from your paycheck. If you have a spouse, they may have been affected if you filed your taxes jointly. It is harder to stop wage garnishment or other bank levy actions after they have been issued. If your disposable earnings are garnished to pay your tax owed, that garnishment is considered by federal income tax purposes. The amount garnished is income 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.

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 may help 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. Our team has extensive knowledge of IRS wage garnishment laws and can help you understand available repayment options.

If you’re facing wage garnishment, it’s important to remember that you do not need to navigate federal law alone. Our tax resolution experts can help you set up an installment payment plan or find a debt resolution plan that best fits what you need, whether you need to minimize the impact to your credit report.

Call us today for more information about how to stop IRS garnishment, levy actions, and get out of owed tax.