Wage garnishment is a stressful situation for anyone, but when the IRS is involved, the stakes can feel even higher. Unlike traditional garnishments, IRS wage garnishment—also known as a tax levy—operates under a unique set of rules that can catch many by surprise.
While other creditors must go through the court system, the IRS wields significant power to collect unpaid taxes directly from your paycheck, often with little notice. This article explains how IRS wage garnishment is different from other types. and why it’s essential to act quickly if you’re facing one.
Understanding Wage Garnishment
In general, wage garnishment is a legal process in which a portion of a person’s wages is withheld by their employer to pay off a debt. It can be triggered by various debts such as
Child support
Student loans
Court-ordered judgments
The employer is legally required to send part of your paycheck directly to the creditor until the debt is satisfied.
In most cases, creditors must obtain a court order before garnishing wages. However, certain debts, like federal student loans or unpaid taxes, may be collected without a court ruling. Wage garnishment can significantly impact your finances, making it important to understand the different types and how they operate.
Facing troubles with wage garnishment? Read this free resource to find out how a wage garnishment attorney can support you.
What is IRS Wage Garnishment (Tax Levy)?
When you owe the IRS back taxes, they have the authority to garnish wages without needing to go through the court system. This process is known as an IRS wage garnishment or tax levy.
Once the IRS sends you multiple notices about your unpaid tax debt and you fail to respond, they can notify your employer to begin withholding a portion of your paycheck. Unlike most creditors, the IRS doesn’t need a court order to initiate this garnishment, making it a more aggressive and swift form of debt collection.
The IRS generally starts by sending a Notice of Intent to Levy, followed by a Final Notice of Intent to Levy. If no action is taken within 30 days of receiving the final notice, the IRS can begin garnishing wages. The IRS typically withholds a significant portion of your paycheck, potentially leaving you with very little to cover your living expenses.
The impact of an IRS wage garnishment can be far-reaching, as the levy continues until the entire tax debt is paid off or another resolution, such as a payment plan or Offer in Compromise, is arranged. This makes dealing with an IRS wage garnishment especially challenging if you’re already struggling financially.
Key Differences Between IRS Wage Garnishment and Other Types of Garnishments
While wage garnishment can be triggered by various types of debt, IRS wage garnishment stands out in several important ways.
Here’s how it compares to other common forms of garnishment:
Wage Garnishment by Court Order (Traditional)
Traditional wage garnishment typically requires a creditor to take legal action and obtain a court order before garnishing your wages. This process can take time, and you have the opportunity to contest the garnishment in court.
In contrast, the IRS can bypass the courts entirely, using its administrative powers to levy your wages directly after issuing a notice. This makes IRS garnishments faster and harder to dispute.
Student Loan Wage Garnishment
Federal student loan lenders can also garnish wages without a court order, using administrative wage garnishment. However, federal law caps the amount that can be garnished at 15% of disposable income.
With IRS wage garnishment, the IRS can take a much larger portion of your paycheck, potentially leaving you with little to cover essential expenses.
Child Support Wage Garnishment
Child support garnishments are automatic, and they take precedence over other forms of garnishment, including those by the IRS. Up to 60% of your disposable income can be garnished for unpaid child support. While the IRS has significant power, child support garnishments usually have priority, meaning they will be deducted first before the IRS collects its share.
State Tax Garnishment
Similar to IRS levies, state tax agencies can garnish wages for unpaid state taxes. However, the process is generally more limited in scope and may require court involvement. In addition, state tax garnishments usually target smaller amounts than the IRS can collect.
Federal Agency Debt Garnishment
Debts owed to other federal agencies can also result in administrative wage garnishment, but they typically follow different procedures and caps on garnishment amounts. The IRS, however, can garnish wages much more aggressively due to its broader enforcement powers.
Bankruptcy Garnishment
When filing for bankruptcy, wage garnishments can be paused or even eliminated depending on the type of bankruptcy filed. However, IRS wage garnishment may still persist in certain bankruptcy cases, particularly if the debt is not dischargeable. The IRS’s ability to continue garnishment through bankruptcy makes it a uniquely powerful creditor.
Visit this blog to learn about other tax debt relief options that you can consider.
Comparative Overview of Wage Garnishment Types:
Why IRS Wage Garnishment Can Be More Challenging to Resolve
Dealing with IRS wage garnishment can be significantly more difficult than other types of garnishments due to the IRS’s broad authority and aggressive collection methods.
Here are some key reasons why it can be more challenging to resolve:
IRS Has Greater Power: The IRS can garnish wages without court involvement, making their actions faster and more difficult to contest.
Larger Percentage of Wages Garnished: The IRS can garnish a higher percentage of your paycheck than other creditors, often leaving you with little for essential expenses.
Compounding Penalties and Interest: Unresolved tax debt continues to grow due to penalties and interest, making it harder to reduce the amount owed over time.
Ongoing Until Debt is Paid: IRS wage garnishment continues indefinitely until the full tax debt, including penalties and interest, is paid in full.
How J. David Tax Law Can Help Address IRS Wage Garnishment
Negotiate an Installment Agreement
Our wage garnishment lawyers can help you set up a payment plan with the IRS, allowing you to pay your debt in smaller, manageable installments. This approach can reduce the financial strain of having a large portion of your paycheck garnished.
Here’s a quick breakdown of the short-term and long-term payment plan:
Short-Term Payment Plan: This plan spans up to 180 days, ideal if you can pay the full debt quickly. While there are no setup fees, penalties, and interest will continue to accumulate until the balance is cleared
Long-Term Payment Plan (Installment Agreement): This option allows payments over 72 to 84 months, depending on the amount owed. The IRS may require financial documentation, and setup fees apply unless using direct debit or other qualifying methods
Pursue an Offer in Compromise (OIC)
If you qualify, we can assist you in submitting an Offer in Compromise to settle your tax debt for less than what you owe. This option is ideal for those experiencing financial hardship and looking for a way to reduce their overall liability.
Prove Financial Hardship
We can work with you to demonstrate that the wage garnishment is making it impossible for you to cover basic living expenses. By proving financial hardship, we may be able to place your account in Currently Not Collectible status, halting collections.
Professional Representation
Our experienced tax attorneys will represent you in all negotiations with the IRS, ensuring that your rights are protected throughout the process. We will explore every legal option to stop or reduce wage garnishment and help you regain control of your finances.
In most of the cases, J David Tax Law can get IRS or State wage garnishments removed within 48 hours. Feel free to call (888) 342-9436 to consult with our wage garnishment attorneys about the right course of action you can take.
Conclusion
Facing IRS wage garnishment can be overwhelming, especially when compared to other types of garnishments that have stricter limits and require court involvement. The IRS holds significant power, and dealing with their wage garnishment requires swift and knowledgeable action. Understanding the key differences between IRS wage garnishment and other forms can help you realize the urgency of addressing the issue quickly.
At J. David Tax Law, our team of experienced tax attorneys, backed by 40 years of collective experience, can guide you through every step of resolving your garnishment, offering solutions that fit your unique financial situation.
Don’t let IRS wage garnishment take control of your finances—reach out to us today or visit us at https://jdavidtaxlaw.com and regain your financial freedom.
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