Taxpayer and Employer's Guide to IRS Form 668-W
(Levy on Wages, Salary, and Other Income)
The IRS has the right to collect delinquent taxes through wage garnishments and asset seizures forcibly. The agency will send Form 668-W to your employer if the IRS decides to garnish your wages. Here is an overview of what to expect if your boss receives this form, as well as tips for employers who receive this form.
IRS wage garnishments can consume a significant portion of your paycheck. To protect yourself financially, you should reach out to the IRS before garnishment. Contact a local tax pro for help today if your wages are already garnished.
What Does Form 668-W Mean?
Form 668-W notifies your employer that you owe back taxes to the IRS, and it instructs your employer to withhold some of your wages and send them to the IRS. If your boss doesn't comply with this form, they can face serious penalties.
What Happens If My Boss Receives Form 668-W?
If your boss receives Form 668-W, they will give you a Statement of Dependents and Filing Status to complete. On this statement, you note your filing status and the number of dependents you claim on your tax return. This information helps your employer determine how much to withhold from your paycheck.
You only have three working days to respond. Otherwise, your employer will garnish your wages as a single person with no dependents. This can leave you nearly penniless.
What If You Receive Form 668-W for Your Employee?
When you receive Form 668-W, you are supposed to start garnishing your employee's wages and sending them to the IRS. You may receive Form 668–W(ICS) or 668-W(C)DO. Do not ignore either of these forms.
If you fail to garnish your employee's wages correctly, you can become personally responsible for your employee's back taxes, penalties, and interest. You can also incur a penalty of 50% of the tax owed.
For example, suppose your employee owes $10,000 in back taxes and you ignore the IRS's instructions to garnish their wages. In that case, you can become personally responsible for the $10,000 tax liability plus a $5,000 fee.
After receiving the garnishment instructions, give your employee the enclosed paperwork and have them return it in three days or less. Then, use that information to determine how much to withhold from their paychecks. In most cases, you must start garnishing your employee's wages within ten days or by the next pay period.
How Much of My Wages Can the IRS Garnish?
The IRS must leave you money for necessary living expenses, but the agency can take everything over that threshold.
As of 2022, if you are married and filing jointly with three dependents, you can keep $751.94 per week. If you're single with no dependents, your weekly allowance is $249.04. Refer to Publication 1494 to see how much of your wages are exempt from garnishment.
These allowances are very low. The IRS thinks you can survive on this amount. Ideally, you should avoid a wage garnishment by making arrangements before the IRS sends Form 668-W. If your wages are already garnished, contact a tax professional to get the garnishment lifted.
How Long Do Wage Garnishments Last?
Wage garnishments last until the tax liability, penalties, and interest are paid in full. However, you may be able to get a garnishment released if the following appy:
- The garnishment was served after the collection statute expiration date (CSED).
- Releasing the garnishment would allow you to pay the taxes faster.
- The garnishment is causing financial hardship.
- You set up monthly payments and the agreement allows the garnishment to be released.
In all of these cases, you will need to reach out to the IRS. The IRS will not release a wage garnishment unless you pay in full, negotiate a payment arrangement, prove that you're experiencing financial hardship, or convince the agency that releasing the garnishment will improve the collection process. A tax professional can help you deal with the IRS.
How Long Should I Garnish My Employees Wages?
If you're an employer, you need to garnish the wages as instructed by Form 668-W until the IRS releases the garnishment. The IRS will send you Form 668-D when the garnishment has been released. You should only stop a garnishment when you hear from the IRS. You should never stop a wage garnishment based on your employee's instructions.
What Is a Continuous Levy?
You may hear a wage garnishment called a "continuous levy". That simply means that the levy (garnishment) continues indefinitely until it is released. In contrast, a "one-time levy" only happens once.
Here's an example. Imagine that you owe $10,000. The IRS sends a levy notice to your bank. You have $5,000 in your account, and the IRS seizes all of it. This is a one-time levy. If the IRS wants to levy additional funds from your account, the agency must send a new levy request.
In contrast, imagine you owe $10,000, and the IRS sends a levy notice to your employer. After completing the paperwork, your employer garnishes $500 from your paycheck. Then, your employer garnishes $500 from your next paycheck, the paycheck after that, and so on. This process happens continuously until the garnishment is completed.
Why Are My Wages Being Garnished?
Typically, the IRS will only garnish your wages if you have ignored several requests to pay delinquent taxes. Before sending Form 668-W to your employer, the IRS will send you a Final Notice of Intent to Levy and Notice of Right to a Hearing.
At that point, you have 30 days to pay your tax liability, set up a payment plan, or request a Collection Due Process (CDP) hearing. A CDP hearing allows you to dispute the tax due or make payment arrangements.
Can I Be Fired for a Wage Garnishment?
Your employer cannot fire you if you just have a single wage garnishment. However, there are no federal laws that prevent your employer from firing you for multiple wage garnishments.
Check the laws in your state to find out if an employer can terminate an employee for multiple wage garnishments.
W4 and Wage Garnishments
Form W4 tells your employer how much to withhold from your paycheck for taxes. Typically, you can submit a new W4 at any time, but you cannot submit a new W4 after your employer receives Form 668-W.
However, if the garnishment lasts for more than a year, you can submit a new Statement of Dependents and Filing Status once a year. This allows you to make changes to the garnishment amount if your filing status or the number of dependents has changed.
Difference Between Forms 668-W and 668-A
The IRS uses Form 668-A to garnish funds from third parties such as banks and clients. For example, if you are a 1099 contractor, the IRS may send Form 668-A to one of your clients. Sometimes, people refer to Form 668-A as a 1099 levy.
If your client receives Form 668-A, they must send the IRS the funds they owe you. Typically, your client must make the payment on the same day they normally pay your invoices.
This can be professionally embarrassing. Clients may see you as irresponsible and untrustworthy if they find out you are not paying your taxes. To protect your reputation, you should try to deal with unpaid taxes before the IRS starts sending out these types of forms.
Independent Contractors and Wage Garnishments
As indicated above, the IRS can send Form 668-A to clients of independent contractors. Form 668-A is a one-time levy form. However, in some cases, the IRS may know that a certain client pays you on a regular basis, similar to an employer. For instance, this may happen if you work for a company in the gig economy or if you have regular long-term clients.
Sometimes, in these situations, the IRS may send Form 668-W to your clients. Because Form 668-W is a continuous levy form, your client may need to send repeated payments to the IRS. However, this is a gray area of the tax code.
According to the tax code, Form 668-A applies to wages, salary, and other income. Arguably, payments from clients may be considered as other income. On the other hand, Form 668-A typically only applies to payments that are fixed and determinable, and payments from clients may not meet these criteria. If you believe that the IRS has sent the wrong form, you should contact a tax professional.
How Much Do I Owe on My Wage Garnishment?
Initially, when the IRS sends out Form 668-A or 668-W, the form will state your total amount due. Your employer or client can see how much you owe when they originally receive the notice, but they will not be able to check your balance after that point. Due to privacy concerns, the IRS will only reveal your current balance to you or your power of attorney.
Get Help With Form 668-W
If you are an employer who needs help complying with Form 668-W, contact a local tax pro today. They can help you ensure that you're handling the garnishment correctly.
Don't let the IRS garnish your wages. Instead, get help with your delinquent taxes today. Using TaxCure's directory, you can search for local tax professionals who have experience with wage garnishments. You don't have to deal with the IRS on your own — contact a local tax pro for help today.