Guide to IRS Garnishment of Wages

Details about IRS Wage Garnishment You Should Know

Learn How Wage Garnishment to Pay Back Taxes Works

You’re already in a financially difficult position by the time the IRS contacts you with notification that they plan to collect the taxes you owe them by garnishing your wages. At this point, you probably received other notices from the IRS about your unpaid taxes and perhaps you feel anxious about what to do next. Should you contact the IRS? Should you set up some type of payment plan to avoid wage garnishment? Is that even possible? How much can the IRS take out of your paychecks? What can you do to stop the IRS from garnishing your wages?

We understand how you can feel overwhelmed by your predicament. You may be worried about covering your living expenses if the IRS starts taking money right from your paycheck before you even see it. One way to reduce your stress is to fully understand the situation you’re in so you can see what options are available to you. Another way to help soothe your anxiety is to speak with Timothy S. Hart. You can rely on his expertise in cases involving the IRS because he’s helped hundreds of people just like you.

For now, you can start here. We offer a complete guide to the garnishment of wages by the IRS where we provide answers to a range of questions you may have.

Being informed is a good first step. Read the 11 answers to questions below and you can check that initial step off your list. Getting solid legal guidance from an attorney you can trust is the best next step. Give Timothy S. Hart a call and take action to resolve having your wages garnished to pay your back taxes. You can reach him in our New York City office at (917) 382-5142 or in our Albany office at (518) 213-3445.

11 Facts about IRS Garnishment of Wages You Need to Know

1. Can the IRS garnish your wages?

In short, yes.  The IRS does have authority to garnish your wages if you owe back taxes. However, by the time the IRS plans to use wage garnishment to collect their debt, they will have provided you with ample notice of their intent to collect your unpaid taxes beforehand.

2. How do you know when the IRS will garnish your wages?

You’ll receive notice from the IRS that they will collect your unpaid taxes via wage garnishment and when process will begin. Before this happens, the IRS will have contacted you multiple times in their effort to collect your back taxes. You can learn more about the collection process here, and they provide further details on their FAQs page.

3. Are there other ways to pay back taxes before the IRS will garnish my wages?

There are several tax settlement options available to you that will precede garnishing your wages to collect back taxes. Unfortunately, interest charges and penalty fees can continue to accrue while you are in the process of repayment. The options are:

• You’ll be given opportunity to set up a short-term payment plan.
• If you’re unable to pay your back taxes that quickly, you can establish an installment agreement for scheduled payments.
• If this form of repayment is too hard for you, you may be eligible to pursue an Offer in Compromise (OIC). An OIC can be a very helpful resolution for your unpaid taxes because you can reach an agreement with the IRS to reduce the amount of taxes you owe. However, you must meet certain requirements.
• If paying your back taxes causes you economic hardship, the IRS will suspend collection, but this may not be a long-term situation. While your payments are suspended you are in “currently-not-collectible” status. Once the IRS determines your financial status changes to the point where you can afford to address your unpaid taxes, they will begin collection again. The application process for a suspension of collection of your tax debt can be complex.
• Finally, if you don’t work out an agreement with the IRS to pay your back taxes, or don’t hold to an agreement, they will issue a Notice to Levy (Notice CP504). This means they will collect your taxes through several possible methods: placing a levy on your bank accounts, seizing your property, or garnishing your wages.

By the time you receive notice that the IRS will levy your assets or wages, you will have had several of those opportunities to address your unpaid taxes that we list above. Ideally, as soon as you receive your first notification from the IRS and feel concerned about how you’ll repay your back taxes, you should contact Timothy Hart. You’ll need the guidance of a highly experienced tax attorney.

4. Can I negotiate with the IRS to avoid my wages being garnished?

Because a notice to garnish your wages is preceded by many prior notices about your unpaid taxes, you are in a poor position to negotiate with the IRS. However, when you initiate communications about repayment of back taxes, the IRS may be responsive. It is likely they will be willing to work with you to set up a repayment plan of some sort. They even have a Fresh Start program to help people like you who have unpaid taxes. If you’ve received a Notice of Levy, talk to our IRS tax lawyer who can fully explain all options available to you to prevent your wages being garnished.

5.  Does the IRS have to take you to court to garnish your wages?

There is no need for the IRS to go to court to accomplish wage garnishment. The IRS can issue a levy and work with your employer to garnish your wages to secure the unpaid taxes you owe directly from your earnings. Unlike the IRS, other creditors, like a mortgage lender or credit card company, would need to pursue a court order to help them garnish wages to collect a debt owed to them. Among the debts that can be collected this way is child support. The court may issue an order to have your wages garnished to meet those payments.

6. For how long will the IRS garnish my wages?

The IRS will continue to garnish your wages to collect unpaid taxes until the taxes and accrued interest and fees are fully collected. Exceptions may be made if you have economic hardship and work out an offer in compromise that results in a reduction in the total amount of back taxes you have to pay.

7. Will the IRS stop garnishing my wages if I file for bankruptcy?

It is possible that any remaining tax debt owed to the IRS will be forgiven if you file for bankruptcy. Not all tax debt will necessarily disappear when you file. It may be considered non-dischargeable by the bankruptcy court and the IRS may be able to continue to garnish your wages to obtain what you owe them after your bankruptcy proceedings are finalized.

8. Can the IRS garnish your whole paycheck?

It would be a very rare occasion when the IRS would garnish your entire paycheck to collect your back taxes. Typically, if you are in a position where the IRS has issued a levy on your wages you don’t have enough funds to cover all of your living expenses separate from your earnings. The good news is the IRS has a limit to how much of your income they will garnish for unpaid taxes.

9. How much can the IRS garnish your wages for back taxes?

You may be surprised at how much the IRS can garnish from your paycheck. While they can’t take it all, they may be able to garnish a substantial portion, depending on your marital status and number of dependents.

The only limitation is how much the IRS deems you need to meet your basic expenses. That amount is considered exempt from wage garnishment to cover your unpaid taxes.

The IRS created a table that provides those exemption amounts, and it is updated each year. This table is broken into four categories for households to account for how many people rely on the income. So, if you’re single and you have no dependents, the amount of your wages exempt from being garnished will be much lower than if you have 4 dependents. There are separate tables for those who are married, for those over 65 or are disabled, or for those who are head of household. The exempt amounts are also provided based on the frequency of your paychecks, whether they are daily, weekly, bi-weekly, or monthly.

Here are two examples from the 2022 table of how much of your wages the IRS can garnish and how much you can keep to cover your basic expenses:

Single father with 2 dependents:

• Earns $3100 take home pay biweekly
• $836.54 is exempt from wage garnishment
• $2263.46 is the amount taken by the IRS for unpaid taxes, every two weeks.

Married parents of 3 dependents who file joint tax returns:

• Together, earn $1800 weekly take home pay
• $667.32 is exempt from wage garnishment
• $1132.68 is the amount taken by the IRS for unpaid taxes, every week.

The portion of your wages that can be garnished are often quite substantial. That is why it’s in your interest to talk to our tax attorney as soon as you receive a notice of levy so you can find out what other options you have.

10. What if the amount of my wage garnishment makes it hard for me to cover my living expenses?

If you experience economic hardship because the wages garnished by the IRS don’t allow you to cover your basic living costs, you can communicate this to the IRS. You may want help from an experienced IRS tax attorney to guide you in the process. You will need to provide the IRS with detailed proof of your economic difficulty to show you cannot meet your basic living expenses if the IRS continues to garnish your wages. If you succeed, you can be placed in currently-not-collectible status. This may give you a chance to breathe a sigh of relief, however, this status is only temporary. As soon as the IRS finds you are able to meet your basic expenses, they may begin to garnish your wages again until your back taxes, fees and interest are fully paid.

11.  How can I stop the IRS from garnishing my wages?

If you want to stop the IRS from garnishing your wages, you should explore all other options you have to pay your back taxes. You should also find out if you can have a temporary pause in the collection of your unpaid taxes. The options such as installment payments or an offer in compromise are typically preferable to facing a levy like wage garnishment.

12.  Does New York State also garnish wages?

Yes, New York State also has a wage garnishment program.