Maybe you haven’t paid taxes in years, perhaps you were busy and simply forgot one year, possibly you avoided paying taxes for financial or emotional reasons. Whatever the reason, you are now threatened with an Internal Revenue Service (IRS) wage garnishment. Wage garnishment requires an employer to withhold part of a person’s earning for the purpose of the person to pay off a debt. In addition to the IRS, wage garnishment can also be issued by courts and federal agencies. Wages garnished can include salaries, wages, bonuses and commissions as well as retirement or pension earnings.



How Wage Garnishment Works

-First, the IRS will send a Notice and Demand for Payment.

-If the taxpayer does not pay the tax or ignores the notice, the IRS will send a Final Notice at least 30 days before the wage garnishment.

-The Final Notice may be served by the IRS in person, at the taxpayer’s home or usual place of business, or the taxpayer’s last known address by certified or registered mail. The IRS is only required to send the notice to the last address it knows for the recipient; the taxpayer does not need to receive the notice in order for it to be valid. Because the IRS may not have a current address for some taxpayers (such as those who have not paid their taxes in a while), many taxpayers see their wages garnished without receiving a notice. The notice will be on intent to garnish wages and the recipient’s right to a hearing.

-By federal law, wage garnishments are restricted to 25% of an employee’s disposable income if employee disposable earnings are more than 30 times the federal minimum wage. Several states, however, have a maximum garnishment level that is lower than 25%.

What Employers Should Know About Wage Garnishment

-A notice is sent to the taxpayer’s employer, telling the employer to withhold a certain amount of the taxpayer’s wages and pay it directly to the IRS.

-The employer is not allowed to refuse the wage garnishment. Should an employer refuse in garnishing an employee’s wages, the employer can be held personally liable for money that was not received by the IRS.

-Wage garnishments are taken out of payroll. There is a particular order garnishments are taken out: first federal tax, then local tax, last other garnishments like from credit cards.

-An IRS wage garnishment will continue until the entire tax debt is paid or other arrangement is made to pay off the tax debt.

How to Avoid Wage Garnishment

-Be sure to contact the IRS as soon as an Intent to Levy or Notice of Levy letter is received.

-Make an appointment with the IRS. Setting up an agreement with the IRS right away will most likely be easier than dealing with the embarrassment of having your employer receive an “Order to Withhold Taxes" letter from your wages. The financial burden placed upon you with a wage garnishment may also be greater than if you just entered into an agreement with the IRS to begin with.

-Get a tax specialist involved. Tax professionals can contact the IRS to negotiate stopping a wage garnishment. The next steps after getting a wage garnishment is released is setting up a repayment plan or getting an offer in compromise settlement.

The best solution to avoiding the problems of wage garnishment is to pay taxes in full, on time and not have to worry about it in the first place. If you find yourself facing wage garnishment, keep working until taxes are paid so you can sleep sound or seek the counsel of a tax specialist who may be able to help with getting the wage garnishment released and negotiating a repayment plan or getting an offer in compromise settlement.