When taxpayers do not pay taxes owed, the IRS will collect their monies due by any means necessary. Since the IRS has access to your financial records, it generally knows how much money you have and where you keep it, thus, the IRS may garnish your wages.
If you don’t pay your taxes, the IRS will typically send you a notice to either asking to pay your bill or set up an installment plan or other negotiated settlement. If you don’t respond to the notice, the IRS can begin its collection activities.
Employers receive a notice telling them to withhold a certain amount of their employee’s wages for payment and cannot refuse to garnish wages. Most taxpayers may not realize they are in danger of receiving a levy until their wages are actually being taken. Wage garnishment by IRS is the process of deducting money from an employee’s monetary compensation in an effort to force the taxpayer to pay back taxes.
One of the limitations on how much the IRS can garnish from your pay is based on your disposable income. For garnishment purposes, your disposable income is the amount you have left after mandatory deductions, such as for Social Security or federal and state taxes. Generally, creditors are restricted to garnishing no more than 25 percent of a debtor’s disposable income per pay period. The IRS does have the right to garnish a greater amount for back taxes, but this usually only happens when the IRS demonstrates that you have an increased ability to pay.
In addition to the disposable income garnishment limit, creditors must respect the minimum wage garnishment limit. Creditors can only garnish weekly wages that exceed 30 times the current minimum hourly wage. For example, if the minimum wage is $8, you can protect your first $240 in weekly wages from garnishment. (According to the Fair Labor Standards Act (FLSA), in 2014, the federal minimum hourly wage is $7.25. The State of Washington has the highest minimum wage at $9.32/hour.) Typically, creditors are limited to the lesser of the disposable income limit or the minimum wage limit. This limit applies to the IRS as well.
Although the IRS has the power to garnish your wages, it also affords you the opportunity to take other measures to settle your debt. The IRS will usually accept an Installment Agreement offer if you can make payments large enough to satisfy your debt within a few years. In extreme circumstances, you may be able to negotiate down your debt by making an Offer in Compromise.
By making arrangements with the IRS, you can help choose the size of payment you will make per pay period, rather than letting the IRS imposes the amount of wage garnishment you must pay. There are specific guidelines that have to be met and forms that need to be submitted in order for this process to work.
At Guzhva Law Firm, we are providing thoughtful solutions and measurable value to each individual situation. Because U.S. tax law and regulations are complicated and constantly changing, it is important that you obtain up to date information about the provisions that apply to you to prevent costly mistakes.
Our tax attorney can help you to stop wage garnishments from taking place. The IRS will expect some sort of concession, and we can work with them to establish a payment plan or reach a settlement. We can help to negotiate a fair offer in compromise and installment agreement that will not ruin your family’s finances. We can help prevent IRS wage garnishment and stop imposed liens and levies for tax delinquencies. We can represent you in the Tax Court.
To schedule a free phone consultation with an IRS collections attorney, please contact us today. With offices in Bellevue, we work with tax clients throughout Seattle and Washington State, and elsewhere.