How to Stop IRS Wage Garnishment in Six Ways
If you owe money to the IRS or receive a tax bill and do not pay it or set up a resolution with the IRS, they can collect taxes owed through wage garnishment. In most if not all cases, the IRS has assigned your matter to a revenue officer who will have his/her name along with contact information listed on the final notice of intent to levy. Once you receive a final notice of intent to levy, you have 30 days to take action. If you do not reach out to the IRS on or before the deadline or request a hearing, the IRS can contact your employer and will move forward with the wage garnishment or wage levy. This means that the IRS will instruct your employer to withhold a certain portion of your paycheck each week or month and send it directly to the IRS. Once your employer receives this notice from the IRS, your employer must give you the Statement of Dependents and Filing Status that you must complete and give back to your employer within three days. If you fail to return the statement, your employer must compute what amount is exempt by levy by assuming your filing status is married filing separately with zero dependents.
Please note the difference between a levy and garnishment. With a levy, the IRS freezes your assets, including your wages, if you are employed. ALL of your earnings will go directly from your employer to the IRS. With a garnishment, a certain percentage of your wages will be deducted each pay period until the debt is satisfied. In both cases, the IRS (or other creditor) must notify you.
The garnishment (a form of a tax levy) generally starts the next pay period after your employer receives Form 668-W(ICS) or 668-W(C)DO. It continues until you pay the back taxes owed in full (aka tax debt), you set up an agreement or resolution with the IRS, or until the arrival of the Collection Statute Expiration Date for tax years that carry a liability. Luckily, there are some resolutions to stop IRS wage garnishment.
The best resolution or resolutions, or the best course of action, is mostly based on your total balance, as well as your tax compliance and financial situation. In almost all the options below, you will need to be current on all your tax filings. In other words, you need to file all tax returns required before the IRS will consider setting up a tax resolution with you.
Ways to Stop or Release an IRS Wage Garnishment or Wage Levy
Request a Collection Due Process Hearing
If you believe that the IRS has made a mistake by sending you a letter of intent to levy your wages, you can file an appeal within 30 days by requesting a Collection Due Process (CDP) hearing. A Collection Due Process or CDP hearing is a procedure of the IRS Office of Appeals. It is an independent organization within the IRS that is separate from the collection office that initiates the wage levy. If the IRS sends you a final notice of their intent to levy, you have a right to request a CDP hearing no later than 30 days from the date of the IRS’s notice of your right to a hearing. Here it is important to retain a knowledgeable tax professional to properly complete and file the necessary form and begin crafting an acceptable tax resolution to present to the IRS on your behalf. If you move forward with filing a timely request for a CDP hearing, collection activity will usually cease (exceptions for jeopardy, a federal contractor, DET, and state refund levies).
You need to fill out form 12153 (Request for a Collection Due Process or Equivalency Hearing)and send it to the address on the letter or the IRS revenue officer on your case. If an IRS Revenue Officer (RO) has been assigned, and you or your representative have made progress to resolve your collection matter, you may want to continue working with that RO. Often, you can request that the RO hold your timely filed CDP request while continuing to work to resolve the matter. In this circumstance, you should be able to preserve your opportunity for a CDP hearing if ultimately you are unable to reach an acceptable resolution with the RO.
If you don’t propose a collection alternative, or offer a defense (e.g., innocent spouse relief) or claim hardship (discussed below), the wage garnishment can resume once the IRS issues a determination. See publication 1660 for more information.
File for an Offer in Compromise
An offer in compromise is a “collection alternative” the IRS will accept (if approved) to stop or release an IRS wage garnishment. The Offer in Compromise (OIC) program is designed to give taxpayers who are unable to pay their full tax debt an opportunity to settle for less than the full amount owed. To qualify, taxpayers must first meet certain criteria set forth by the IRS. If approved, an OIC can help the taxpayer pay less or even eliminate the tax debt entirely. In addition, an OIC can stop IRS wage garnishment and other collection activities. As a result, the OIC program provides a much-needed lifeline for taxpayers who are struggling to pay their tax debt.
A knowledgeable tax professional can craft the OIC as part of the CDP process or outside the process and present to you advantages vs disadvantages. If you think you may qualify for an OIC, contact a tax professional on TaxCure today to learn more about this powerful tool for resolving taxes owed.
Enter into a Payment Plan or Installment Agreement
The IRS has various payment plans, often referred to as Installment Agreements. There are a number of different types of installment agreement. You can work with a licensed tax pro or call the number on your levy notice. An installment agreement or payment plan requires you to make monthly payments toward your IRS tax debt. Assuming you are tax compliant (meaning all your tax returns have been filed) and the IRS approves your tax payment plan, the wage garnishment stops. Installment agreements are a great way to avoid or stop IRS wage garnishment and other enforcement actions if you have tax debt or unpaid taxes you cannot pay off. If you think an installment agreement might be right for you, contact the IRS or find a local tax professional on TaxCure.
Prove Financial Hardship
If you can prove that the levy causes financial hardship, the IRS can declare you uncollectible even if you are not current on your tax filings. If your case is approved, the IRS will temporarily pause all collection actions until your financial situation improves. This includes wage garnishment, levies, or property seizures. To prove financial hardship or prove uncollectible status, you will have to provide a lot of detailed financial information to the IRS supporting financial hardship.
"Securing a removal of a wage garnishment requires patience and persistence. I remember a taxpayer who was retired and the IRS was garnishing roughly $1200 per month of his pension. This was going on for approximately 4 years. There was no longer an RO in place. Even after qualifying the client for CNC with ACS, they were not in a position to remove the levy. I was getting nowhere with the IRS (ACS) since they could not remove the levy. After 2 months of getting nowhere, I sought the assistance of TAS (911). It took TAS approximately 60 days to respond. And then it took the head of TAS at the national level to intervene and with her assistance, it took another 3 to 4 months to finally get the levy released. I had already demonstrated that the taxpayer qualified for CNC. Again, it requires persistence and patience along with being clear as to what remedy you are seeking. In my case, I wanted the release of the levy with a copy faxed to the pension administrator. This is exactly the result I was able to achieve, but it took approximately 7 to 8 months to get the result the client wanted." — Agustin Arbulu, Michigan Tax Attorney
Innocent Spouse Relief
If you file jointly or did so in the past, you and your spouse are jointly responsible for back taxes owed. However, if the tax levy pertains to a year, you filed together, and you do not feel you are responsible, you can dispute the tax liability. One way to do this is by applying for Innocent Spouse Relief (ISR). If you qualify for innocent spouse relief, the IRS will release any wage garnishments that have been placed on your wages and will also possibly forgive all or part of any taxes that you may owe. It is highly advised you work with a tax professional in proving your innocent spouse claim.
File for or Declare Bankruptcy
Filing for bankruptcy automatically stops the wage garnishment. In some cases, bankruptcy provides a means for a taxpayer to erase old income taxes owed or get tax debt discharged. However, if you have remaining taxes owed, the IRS can start the wage garnishment after the bankruptcy is complete. It also has a severe impact on your credit, and it should be a last resort. If you are considering this option, work with a bankruptcy attorney.
What Is the Maximum Amount the IRS May Garnish from Your Wages?
Generally, the IRS can garnish up to 25% of your disposable earnings for unpaid taxes. When the IRS orders your employer to garnish your wages, it sends a Form 668-W(ICS) or 668-W(C)DO with the enclosed table (Publication 1494). The IRS takes everything over the amount mandated by the table, which is how much of your earnings are exempt from garnishment. The amount you get to keep is set by your filing status, pay frequency, and the number of dependents you claim. Furthermore, the amount a taxpayer can exempt from levy is dependent on their age and/or blindness.
For example, in 2024, if you are a single person with two dependents and your employer pays you weekly $1000 or more the IRS allows you to keep $473.07 each week and the rest is garnished.
Ways to Negate the Effect of an IRS Wage Garnishment or Wage Levy
Reduce Your Income Enough to Be Declared Uncollectible
If you don’t qualify for hardship status under your current salary, you can cut back on hours until you fall below the threshold. Be careful with this option—if the IRS can’t garnish your wages, it may try to seize your bank account or other assets. Most importantly, having less income is not going to help your situation.
Change Employers or Temporarily Quit Your Job
Again, this is an option, but not a good one. Some people even quit their jobs or move to another employer to avoid wage garnishment. They assume that the IRS or state will take months to find them. Unfortunately, this is not a great idea. As soon as the IRS realizes that another employer is paying you, the wage garnishment will start up again.
A wage garnishment is one of the IRS’s most serious collection actions. If you have received a final internet to levy or if the tax wage garnishment has already started, you should get help from a tax pro as soon as possible.