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What To Do When Your Wages Are Garnished

February 05, 2016

When back taxes go unpaid, the IRS can place a levy on a taxpayer’s wages, property, right to property, and bank accounts. Worse, the tax agency does not need a court order to do so. When it comes to your wages, you may want to review some basic steps to avoid a garnishment:

File Back Tax Returns

If you did not file a return for any year, you should file as soon as possible. An IRS requirement for the resolution of tax debt is that you have filed all required tax returns.

Apply for a Payment Plan

Although the simplest way to stop a wage garnishment is to pay your entire back taxes (plus interest and penalties), many taxpayers are faced with financial challenges which prevent this. If you cannot pay your entire tax debt, you have the following options:

Installment Agreement: If you cannot pay your full back taxes in a single payment, you can apply for an installment agreement (IA) to pay your tax debt in fixed monthly installments. The amount of your installment is determined after considering your income and the amount of back taxes.

Offer in Compromise: If you cannot pay your full tax debt due to financial limitations, you may consider applying for an Offer in Compromise. The IRS may accept your request if they believe that a reduced amount is all that they can hope to collect.

Cite Hardship

If you are unable to meet basic living expenses, such as food, housing, or basic services, you can contact the IRS and inform them about your financial situation. The IRS can only collect back taxes if their action does not push you into a financial crisis where you are unable to meet allowable living expenses.

Important Facts

Typically, the IRS releases a levy only if they believe this will help you to pay your back taxes. Even if you have a financial hardship, the IRS will change your status to Currently Not Collectible (CNC) where they wait for your financial condition to improve so that they may begin collection actions. If the tax debt remains unpaid for the 10-year collection period (known as the collection statute of limitations), however, the IRS will discontinue action against you.

Filing for bankruptcy and changing your job are temporary solutions that can stop wage garnishment for some time. A lasting resolution is required to get rid of wage garnishment permanently.

After the IRS stops wage garnishment, it is important to resolve the back taxes and comply with your established agreement. The IRS can reinstate a levy if you do not meet the terms of the agreement.