Paying your tax debt in full is the most straightforward way to stop a wage garnishment. Unfortunately, that’s not an option for most people in this situation, but if possible, you may want to pay the tax debt with a credit card or borrow money from friends and family.
Instead of that, here are the other strategies you can use to stop IRS wage garnishment:
Set up an Installment Agreement.
An installment agreement allows you to make monthly payments on your tax liability. Generally, when the IRS approves an agreement, its terms specify that any IRS wage garnishments must stop. To be on the safe side, however, you should contact a tax professional to ensure that the terms of your agreement state that the garnishment must stop.
In most cases, the IRS allows people who owe less than $50,000 to set up payment plans online, and as long as you set up your payments to come automatically out of your bank account, you shouldn’t need to make a financial disclosure.
If you owe more than $50,000 or if you can’t pay off your tax liability by the collection statute expiration date (this is the last date that the IRS can legally enforce collection actions against you for the tax debt), you need to submit a Collection Information Statement with your payment plan application.
These are the standard rules for setting up a monthly payment plan. Once the IRS has started garnishing your wages, the agency may require you to follow a slightly different process to set up a payment plan.
Establish that wage garnishment is creating financial hardship.
Financial hardship is when the garnishment prevents you from paying for necessary living expenses. Contact the IRS or a tax attorney if you cannot afford to pay rent, mortgage, utilities, grocery bills, or medical expenses due to the wage garnishment.
The IRS will stop garnishments that are creating economic distress. Additionally, if you prove that you’re experiencing financial hardship, the agency will mark your account as “currently not collectible” and stop all collection actions against you. However, this doesn’t mean that your tax debt goes away. The IRS will review your account every couple of years to see if your financial situation has improved.
Convince the IRS that stopping the garnishment will help you pay your tax debt.
The IRS will remove a wage garnishment or any other type of levy if you can convince the agency that doing so will help you pay your taxes. Convincing the IRS tends to be easier with asset levies. For instance, you can usually convince the IRS to remove tax levies from assets that you use to generate business revenue.
Consider working with a tax attorney if you want to use this option to stop a wage garnishment. They can leverage their knowledge of the tax code to get you the best result possible.
Request an Offer in Compromise
An offer in compromise is when the IRS lets you pay off your tax liability for less than you owe. The IRS only grants these arrangements in the following situations: 1) if you can’t afford to pay the tax bill in full, 2) if it would be inequitable to require you to pay the bill in full, or 3) if there is a doubt that you owe the full tax bill.
To apply for an offer in compromise, you must tell the IRS about all of your income and assets or establish that you don’t owe the tax liability. Then, the IRS will use this information to determine your settlement amount. The IRS will pause the wage garnishment when you submit your offer-in-compromise application, and if approved, the garnishment will not restart.
Apply for Innocent Spouse Relief.
The IRS will also stop garnishing your wages if you apply for Innocent Spouse Relief. This program provides relief to people who incurred a tax debt exclusively related to their spouse’s actions without their knowledge. The application process can be complicated, and for the best results, you should work with a tax attorney who understands the tax code.
How to Stop a Wage Garnishment If the IRS Made a Mistake
The IRS must reverse the garnishment if it didn’t follow the correct protocol when issuing the garnishment. In particular, the IRS must send you a Final Notice of Intent to Levy and give you at least 30 days to respond or appeal.
Additionally, the agency cannot garnish exempt assets, and it can only issue a garnishment if the collection statute has not expired. If the IRS issued a garnishment in any of the following situations, it must stop the garnishment:
- 1. Without sending the required notice.
- 2. When an automatic stay due to a bankruptcy case was in effect.
- 3. While you were making payments on an Installment Agreement.
- 4. When you had an Offer in Compromise or Innocent Spouse Relief approved on your account.
- 5. While the agency was considering your application for an Installment Agreement, Innocent Spouse Relief, or an Offer in Compromise.
- 6. While you were appealing the tax debt with the Office of Appeals or the Tax Court — However, there are exceptions if the IRS believes the tax collection is in jeopardy or with disqualified employment tax.
- 7. While you were appealing a denial of an Innocent Spouse Relief request.
If you didn’t receive ample notice or the IRS made another mistake, you should request to have the garnishment removed. The IRS must remove these garnishments, and the agency must also return any exempt property that it took from you.
How to Stop IRS Wage Garnishment on Exempt Wages
The tax code exempts a certain amount of your wages from garnishment. At the beginning of the wage garnishment process, the IRS will send a notice to your employer stating that they need to garnish your wages because you owe money to the IRS.
Your employer will also give you Publication 1494 and a Statement of Dependents and Filing Status. This allows your employer to see how much of your income should be exempt from the garnishment. If you don’t return the form in three days, your employer will garnish your wages as if you are a single filer with no dependents.
If the garnishment affects exempt income due to an employer mistake or because you didn’t complete the Statement of Dependents and Filing Status, you need to contact the IRS. The exempt amount changes each year, and it varies based on your situation.
As of 2023, a single filer with no dependents has a monthly exemption of $1,154.17. In contrast, a married couple filing jointly with three dependents has an exemption of 3,483.34. Here is the IRS’s exemption table. Contact a tax professional if your wage garnishment exceeds your exemption.
Other Options to Reduce or Stop IRS Wage Garnishment
Besides the above options, there are a few additional ways to stop an IRS wage garnishment. We do not recommend these strategies, but they can be effective if you just want to stop the garnishment temporarily:
Declare bankruptcy.
Bankruptcy will not necessarily eliminate your tax debt. To get tax debt discharged in bankruptcy, the debt generally must be income tax at least three years old.
However, when you file for bankruptcy, the courts issue a stay, and while that is in effect, all collection actions against you including wage garnishments must be stopped. Keep in mind that the stay is only temporary.
Reduce your wages to below the exempt amount.
The IRS can only garnish wages above the exempt amount. The IRS cannot garnish your wages if you earn under that threshold. However, even if you reduce your income, you will still owe the taxes, and the IRS can explore other options for collecting your tax debt, such as seizing your bank accounts or other assets.
Quit your job.
Quitting your job will temporarily stop the wage garnishment. However, as soon as your new employer submits your information to the government, the IRS will know where you are working. Then, the agency will start the wage garnishment process with your new employer.
Get Help Stopping an IRS Wage Garnishment
The IRS uses wage garnishments as a last resort when it cannot get a taxpayer to resolve their tax debt in any other way. However, the IRS is still willing to work with people who have garnishments against them. Contact us today to stop a wage garnishment and get relief for your tax issues.
Attorney Timothy Hart
Timothy S Hart, the founding partner of the tax law firm of Timothy S. Hart Law Group, P.C. is both a New York Tax Lawyer & Certified Public Accountant. His area of expertise includes innovative solutions to solve your Internal Revenue Service and New York State tax problems, including tax settlements through the Federal and New York State offer in compromise programs, filing unfiled tax returns, voluntary disclosures, tax audits, and criminal investigations. [ Attorney Bio ]
