What Is IRS Wage Garnishment?
The IRS has many ways to collect money if a taxpayer does not pay their taxes. At first, the agency will send you notices and try to work with you. But if you ignore the notices and don't make arrangements for your tax debt with the IRS, the agency can come after you and involuntarily take the money you owe. One method of forcibly taking money for unpaid taxes is called an IRS wage garnishment. Here is an overview of the IRS wage garnishment process.
What Is IRS Wage Garnishment?
IRS Wage garnishment is when the IRS collects unpaid taxes directly from an employee's earnings. A wage garnishment allows the IRS to collect money when you have not been paying your tax liability. With the typical wage garnishment process, the IRS contacts your employer and instructs them to take funds out of your paycheck using IRS Form 668-W. Next, your employer must send the money to the IRS. If your employer fails to send payment to the IRS, liabilities may pass to your employer. As a result, once your employer receives this notice, you can rest assured that they will do as requested.
How Much of Your Wages Can the IRS Garnish?
If you owe money to the IRS, the agency can garnish salaries, wages, bonuses, commissions, and possibly even retirement or pension earnings. Unlike garnishments for private debts or student loans, the IRS doesn’t garnish a particular percentage of an employee's earnings. Instead, the agency decides how much you need to live and takes the rest. The IRS utilizes a table to determine how much they cannot levy from your paycheck each pay period. Even if you earn minimum wage, the IRS may still be able to garnish some of your wages.
The standard deduction and the number of dependents you have determine the amount of income exempt from IRS levy under federal law. Consequently, your filing status, the number of dependents you claim, and your pay frequency help your employer calculate the amount of money to leave you with each pay period. Typically, if you're single, the amount the IRS lets you keep is a little more than the federal minimum hourly wage. For example, if you work full-time at the federal minimum hourly wage, your earnings should be about $290 per week, and the IRS leaves you $234.62 per week if you're single with no dependents. Note that at the time of writing, the federal minimum wage is $7.25 per hour.
In most cases, this amount is probably less than you spend on a regular basis. As of 2023, if you get paid weekly and you file single with three dependents, the IRS leaves you only $537.49 a week. If you get paid weekly and file as married filing jointly with three dependents, you get to keep $803.83 per week or $3,483.34 per month. The federal law allows the IRS to take any money you earn over these thresholds. Moreover, these amounts go higher if the taxpayer takes an additional standard deduction for their age and/or blindness.
Here is a subset of the table the IRS provides your employer so they can calculate your IRS wage garnishment for 2023. The table below only expresses the amounts exempt from an IRS wage levy based on filing as a single person. If you file as head of household or married filing jointly, your exempt amount will be higher for the same number of dependents.
If you have two jobs and one covers your “living expenses,” the IRS may garnish 100% of your paycheck from the other job. Additionally, if your boss issues a bonus, the IRS may take all of that.
This levy stays until you pay off your taxes owed or until you make other arrangements with the agency. Alternatively, the IRS will release a levy if the statute of limitations on collection arrives.
How Do You Know the IRS Is Going to Garnish Your Wages?
The IRS will send you a notice that they are going to garnish your wages. The notice will include the amount of money that they plan to take from your paycheck and where the money will be sent. If you do not agree with the IRS's decision to garnish your wages, you can appeal the decision or try to negotiate a payment plan. You must respond by the deadline noted on the letter or the IRS will move forward with the wage garnishment. Note this is never the first notice that you receive from the IRS. Usually, by the time the IRS garnishes your wages, the agency has sent you several notices.
If the IRS does garnish your wages, they will send a notice to your employer with instructions on how much money to withhold from your paycheck. Your employer will give you a form to fill out so that they can figure out exactly how much to withhold. If you don't return the form on time, your employer will withhold the maximum amount from your check. Usually, you have three working days to return the form. At this point, whether you returned the form or not, your employer is required to withhold the money and send it to the IRS.
When Will the IRS Impose a Wage Levy and Garnish Wages?
A tax levy is typically the next collection step following a tax lien. However, sometimes the IRS skips the tax lien and begins to levy right away instead. A levy is when the IRS takes your assets to satisfy your taxes owed. Most private creditors have to go through a legal process to become a judgment creditor. The IRS doesn't go through this same process. As long as the IRS sends you the correct notices, the agency can start to garnish your wages.
The IRS can legally seize an employee's wages, bank accounts, Social Security benefits, retirement accounts (rare), commissions, property, rights to property, and more. For the IRS to levy an employee's wages or other assets, however, the IRS must meet the following three requirements:
- The IRS assessed a tax liability and sent you a notice demanding payment
- You neglected or refused to pay the tax amount due.
- The IRS sent you a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (must be sent to you 30 days before they a levy ensues)
The IRS must deliver these notices by hand or send them via registered mail to your last known address or place of employment. Once you receive the Final Notice of Intent to Levy and Notice of Your Right to a Hearing, the IRS can begin to levy after 30 days.
Exceptions to the IRS Levying Without Providing 30 Days Notice in Advance
The IRS doesn’t always have to provide you with a 30-day notice of your right to a hearing before levying your property. Furthermore, here are some situations where they do not have to notify you in advance:
- Jeopardy Levy – If the IRS feels that they are in jeopardy of collecting the tax, they can levy your property without providing notice in advance.
- A Disqualified Employment Tax Levy – If you have previously requested a collection due process hearing for payroll or employment taxes for a specific tax period within the last two years, the IRS can levy for other tax periods without providing you notice in advance.
- Federal Contractor – If you are a federal contractor, then the IRS can seize property and provide you notice afterward.
- State Tax Refund Levy – The IRS can seize a state tax refund without offering you 30 days' advance notice
The IRS does not like to impose wage levies. They are costly, and the IRS prefers to use them as a threat. However, if you don’t respond, the IRS will carry through on that threat. If you receive a final notice, request a free consultation to get help from a tax professional to understand all your options. A licensed professional can contact the IRS and apply for a payment plan, settlement, or hardship status, just to name a few tax relief options.
IRS Wage Garnishments and Child Support
Many people have their wages garnished for child support. Child support wage garnishments take precedence over most over garnishments. This means that your employer will withhold amounts for a child support garnishment before most other garnishments. However, there is an exception for IRS garnishments. If the IRS wage garnishment was entered before the child support wage garnishment, the IRS wage garnishment will take precedence. In other words, your employer will take out the garnishment for the IRS garnishment first, and then, they will take out the child support garnishment. If the child support garnishment was received first, it will typically take precedence over the IRS wage garnishment.
IRS Wage Garnishments and Garnishments for Federal Student Loans
Another common wage garnishment is for student loans. Typically, IRS tax garnishments take precedence over garnishments for federal student loans. If your employer receives a request to garnish your paycheck for both IRS taxes and student loans, they will typically follow through with the IRS tax garnishment first. Note that under federal law, your employer cannot terminate your employment for a single garnishment, but there is no federal law that prohibits them from firing you if you have multiple garnishments.
How to Stop an IRS Wage Garnishment
A wage garnishment can be a major financial burden. It can leave you with less money than you need to cover your basic living expenses. If you are facing an IRS wage garnishment, there are a few things that you can do to stop it. You can stop a wage garnishment by paying your taxes in full. If that's not possible, you can contact the IRS and try to negotiate a payment plan. If you arrange to pay back your taxes over time, the IRS may stop the garnishment. You can also request an offer in compromise, which is when the IRS lets you pay back your taxes for less than you owe. If you cannot afford to pay anything, you can request to have your account labeled as currently not collectible. When you have that status on your account, the IRS pauses all collection actions.
The IRS may also stop the wage garnishment if you can prove that it's causing financial hardship. In some cases, you may also want to prove that stopping the garnishment will allow you to pay off the tax liability faster. If you can prove that fact, the IRS will also stop the garnishment. You can even stop a wage garnishment by quitting your job. But this is not ideal because the IRS will find you at your next job.
Get Help Stopping an IRS Wage Garnishment
There are several ways to stop wage garnishments with the IRS. The method you choose to use depends upon your financial and tax situation. It is a good idea to understand the various options so you can ensure the best financial outcome for your situation. It is generally a good idea to talk with a tax professional about your wage garnishment to get the best outcome. You can start your search below using the form to find the highest-rated local tax professionals from our large network of tax problem experts around the country.