IRS Wage Garnishments: A Complete Guide

It doesn’t matter whether you’re in the middle class, or whether you’re just scraping by paycheck to paycheck. Life is expensive and sometimes payday can’t come soon enough. So trust us when we say this: You’re never really prepared for IRS wage garnishments.

Seriously. Did you know that 78% of workers in the United States live paycheck to paycheck? It’s true. Even 1 in 10 workers earning over $100,000 live paycheck to paycheck. According to data published in 2019, roughly 40% of Americans would struggle to come up with $400 to pay an unexpected bill. This means taking out a loan or turning to credit cards to cover the bill.

The truth is that any unexpected change to our financial situation runs the risk of throwing us off our game plans. It doesn’t matter whether you make $150,000 a year or $20,000. And it doesn’t matter whether you’ve lost your job, made an addition to your family, or blew out a tire on the interstate. When somebody throws a wrench into the machine, the machine can break down. And that’s why it’s so important to learn about the IRS wage garnishment.

IRS wage garnishments can become an overwhelming burden that gets in the way of short-term and long-term financial plans.

Our Background on IRS Wage Garnishments

How do we know? Well, because we are at StopIRSDebt.com have fought back against—and removed—thousands of them.

Since 2001, we’ve helped thousands of clients get money back in their pockets. One consistent lesson over two decades as a full-service tax representation firm is that most folks simply don’t know that much about tax law. Unfortunately, that leaves them with mounting tax debt at the mercy of the IRS. We wouldn’t wish this on our worst enemy.

That’s why we’re here to help. We’re going to walk you through IRS wage garnishments, top to bottom. We’ll explain what IRS wage garnishments are and how they come about, as well as important facts about fighting and removing wage garnishments. Then, we’ll answer FAQs from our clients that you may be thinking, yourself.

Let’s get this started.

What’s a wage garnishment?

You may not be familiar with what wage garnishments are, but we promise, you know one when you see it. We think it’s always simplest to start with a basic definition.

Wage Garnishment – A legal procedure in which a person’s earnings are required by court order to be withheld by an employer for the payment of a debt.

Essentially, a wage garnishment is a legal action that forces your employer to redirect some of your earnings to pay a debt. So instead of getting your usual, say $600 weekly paycheck, depending on your debt and the specifics of the garnishment, you may get $500, instead.

Wage garnishments are a serious legal action. They don’t just happen willy-nilly. So if you find yourself on the receiving end of a garnishment, you know things are serious. Wage garnishments can be applied to most types of debt, not just IRS debt. You could just as readily get hit with a wage garnishment due to a loan as you might to an overdue bill.

Okay, so what are IRS wage garnishments?

It’s worth giving a few more details about what, exactly, makes an IRS wage garnishment different from any other garnishment. Fortunately, the difference is pretty simple. The IRS may garnish your wages if have serious tax debt and haven’t worked with them to pay it.

How the IRS Decides to Garnish Wages

IRS will never garnish your wages just because, or if you’re a few days late with your tax payment. Like we said, IRS wage garnishments indicate the IRS means serious business. Typically, they’re a result of outstanding tax debt and a failure to make attempts at repayment.

Step 1: The IRS assesses your tax debt and sends you a notice.

If you owe money to the IRS, it’s a good rule of thumb to assume the IRS will find out. Sure, some tax evaders make it years without the IRS getting wise, but it always comes out in the wash at some point. Whenever the IRS determines you owe them money, they’ll estimate what they believe that total is and notify you by mail.

The letter you get from the IRS usually will include a notice and a “Demand for Payment,” with the total they’ve estimated for you. Think of it like an overdue notice you might get from the electric company.

Warning: The IRS does not email or call you about your tax debt. For these notices, they communicate almost exclusively by mail. If you get a call from someone claiming to be from the IRS, do not give them your information, then call the IRS directly. It’s probably a scam. By reporting it, you might be able to help somebody avoid identity theft down the line. Watch the below video to learn more.

Step #2: The IRS sends you another notice.

When you receive a bill from the IRS, they expect you to pay it promptly. And every month you wait, penalties and interest swell your tax total. But if you don’t pay the total or attempt to negotiate an installment agreement, the IRS will send you another notice. This one is a “Final Notice of Intent to Levy” and a “Notice of Your Right to a Hearing.” You should take all letters from the IRS seriously, but these two are the big red flags. They let you know the IRS wage garnishment is about to be knocking on your door. Or rather, on your paycheck.

Step #3: The IRS garnishes your wages.

If you still haven’t made any attempts to correct course and make things right with the IRS, they will turn to the wage garnishment. They’ll send information to your employer, who will pass along a “Statement of Dependents” for you to fill out, which helps them determine how much of your pay they’ll redirect to the IRS. And your life will be radically impacted.

Remember: The IRS always gets its money. Or it gets as much of its money as it thinks it possibly can. If you owe back taxes, the IRS will try to hound you down to get their hands on it. But they also have a number of legal actions they can take. And wage garnishment is one of them. If you find yourself on the receiving end of a garnishment, there’s a good chance the IRS has made numerous contacts.

Now, what do IRS wage garnishments look like in practice?

What happens in an IRS wage garnishment?

When the IRS garnishes your wages, your paycheck will get noticeably thinner. And trust us when we say it will be noticeable. Your employer will use this chart to help them determine the amount of your pay to withhold.

You want examples? We’ve got examples.

1. Tom

Middle aged white male creative sitting in an office smiling to camera, head and shoulders, close up

Tax Filing Status: Single

Dependents: None

Pay period: Biweekly

Salary: $31,500

Tom is single without children, and he receives weekly pay. The total take home that is exempted from your wage garnishment is $476.92. Anything over that can go to the IRS. So if Tom typically earns about $600 on every paycheck, the IRS may be reducing his take home pay by $123.08.

2. Maggie

Millennial Asian businesswoman looking out of the window in an office, head and shoulders, close up

Tax Filing Status: Head of Household

Dependents: Two

Pay period: Monthly

Salary: $60,000

If Maggie files as the head of your household, which includes two dependents, the IRS can reduce her pay down to $2270.83. For reference, an annual salary of $60,000 would normally earn her $5,000 monthly, before taxes.

3. Marianna & William

Parents Carrying Son On Shoulders As They Walk In Park

Tax Filing Status: Married Filing Jointly

Dependents: One

Pay period: Semimonthly

Salary: $120,000

If spouses Marianna and William file a joint tax return and have one child, they could potentially both be impacted by a wage garnishment. Their new take home on the 1st and 15th of the month could now be $1212.50 each—until they pay their tax bill.

4 Serious Impacts of IRS Wage Garnishments

Wage garnishments are nothing short of a doomsday scenario for any financial plans on your horizon. There are four main consequences of wage garnishments.

1. Financial Strain

If you’ve ever heard the phrase “tightening the belt,” it may as well have been invented to describe IRS wage garnishments. As a government entity, the IRS has a lot more leeway to levy your wages than other creditors might. In some cases, you might find yourself operating on a budget 25% or 50% lower than you’re used to. Of course, you can reach out to the IRS if your garnishment is putting a genuine financial hardship on you. But the IRS isn’t always too forgiving. And serious financial strain is inevitable.

2. Derailing Personal Goals

As soon as the IRS places a garnishment on your wages, you can kiss your financial goals goodbye. Most of us tend to live slightly beyond our means, or at very least could save a bit more, a bit sooner. But regardless of your personal goals for the future, you’ll have a hard time accomplishing them when you’re operating at a fraction of your usual budget. Are you saving up for a house? What about car to replace that old junker? Or, perhaps you’re putting money away for your—or your child’s—education. An IRS wage garnishment can put all those hopes on hold.

3. Stress

Money is stressful enough, but having back tax debt that has now impacted your regular income is another level. As the belt tightens, it will become harder to continue your usual habits. Maybe you need to cancel your weekly movie night out, or you simply don’t have enough for your morning Starbucks run. Or, you start leaning on your credit card a bit more—and we all know that’s a slippery slope. Depending on your IRS total, the anxiety you trace back to your debt can linger for weeks, months, or years as the garnishment continues to siphon off your wages. The relaxation Our wage garnishment clients come from all walks of life, and on a personal note, hearing their stress is kind of heartbreaking. Nobody deserves to feel this hopeless, and they certainly don’t deserve to feel that way for years.

4. Embarrassment

Your tax debt may be stressful. But there’s an added element of embarrassment to wage garnishments because your employer is aware of your tax debt. Now, we should be clear: The Department of Labor protects employees from termination because of a wage garnishment. However, this protection won’t stick around for your second wage garnishment on a future debt. Because of HR policies, it’s pretty unlikely your tax debt will make its way to the break room chatter. But it’s still hard to shake that fear that somebody knows. When an IRS wage garnishment reaches your employer, your tax debt is no longer your dirty, little secret. And that can feel humiliating.

Stopping Your IRS Wage Garnishment

If the IRS has placed a wage garnishment on your earnings, you can take action and put a stop to it. In fact, there are ways to stop your IRS wage garnishment before it even hits your first paycheck!

Wage garnishments are intimidating, and that’s kind of the point. Like tax liens, they can severely impact all aspects of your day-to-day life. But they’re not the boogeyman. All it takes to get yourself your money—and your life—back is a decision to put a stop to your tax debt once and for all.

Unfortunately, not every tactic actually works in removing your wage garnishment. A few common but unreliable tactics still entice plenty of taxpayers each and every year.

2 Wage Garnishment Tactics You Should Never Use

We have worked with countless clients who have tried to “resolve” their wage garnishment without addressing any of the causes that led to it. These tactics are ineffective and only prolong your tax problems.

1. Quitting Your Job

Some people attempt to avoid a wage garnishment by quitting their jobs entirely. Technically, the IRS can’t get their hands on your paycheck if you don’t have one. Right?

Okay, we can’t completely deny that argument. But what does it get you? To avoid the IRS taking 25% of your wages, you opt instead to eliminate 100% of your wages. Not only does this exacerbate the financial strain you find yourself it, but it merely kicks the can down the road. Your tax debt will still exist, except now you don’t have your primary income source. And worse, if the IRS cannot get their money via garnishment, they may turn to other tactics, like a tax lien on your property.

2. Changing Employers

Similar to the “quit your job” route, some taxpayers think they can dodge their wage garnishment by moving to another employer. After all, your current employer is the one levying your wages.

It makes sense why some people try this route, because it feels like a better solution than quitting your job entirely. However, it has one major flaw: You will file tax paperwork at your new job the day you start. By switching jobs, you’ve only delayed your wage garnishment by a short time. As soon as the IRS gets your tax paperwork from your new employer, they will be quick to send your employer the garnishment. And you’ll be right back where you started.

3 Ways to Stop IRS Wage Garnishments

You can only stop an IRS wage garnishment through a limited number of strategies. As ineffective as those last tactics are, the following tactics are the opposite. Using these four strategies, you can delay or eliminate your IRS wage garnishment once and for all.

1. Pay Your Debts

The surest way to stop IRS wage garnishments—or avoid the process entirely—is to pay your taxes and handle your tax debts in a timely manner. That means staying current on your tax return filing and paying your tax debts before they balloon into something unmanageable.

However, we understand that sometimes tax debt can get out of hand before you realize it. If that’s the case, your best way to avoid the IRS levying your wages is to be responsive with all IRS communications and take earnest steps to pay your debts.

Pro Tip: A professional tax mediation company can help you review your previous returns and finances—which may lower your tax bill.

2. Establish an Installment Agreement

For smaller tax debts, it may be within your budget to cover the bill and move on. However, tax debts of thousands, tens of thousands, or more may simply not be doable in one lump sum.

When you respond to communications and notices from the IRS, you may be in a position to work out an installment agreement—which means you make regular payments over time until your debt is paid.

At first, this may not seem all that different than having your wages garnished. But think about it. You’ll be in repayment one way or another. Wouldn’t you prefer to receive your full paycheck and direct some of that toward another bill—rather than having the IRS decide how much of your paycheck you’ll get in the first place?

Pro Tip: Enlist a tax relief company to help you lock down an installment agreement that works for all parties involved.

3. Prove Your Financial Hardship

As we’ve discussed, IRS wage garnishments can put you and your family in a serious financial bind or at least significantly change your standard of living. However, for some taxpayers, a wage garnishment can push you over a financial cliff to the point you simply cannot make ends meet.

In these cases, you may be able to qualify for financial hardship. After you get current with all your past due tax returns and gather your financial information to verify your income, expenses, and assets, the IRS will review your information. If you qualify, the IRS will put your account in currently not collectible (CNC) status.

While this can be a big relief, financial hardship isn’t a permanent stoppage on your wage garnishment—it just means the IRS won’t be actively collecting your tax debt for a period of time. You will still owe the IRS money and you will still accrue interest on that debt. You may still even have a federal tax lien on your credit report.

Pro Tip: Give yourself a chance of eliminating—not postponing—your tax debt by finding other solutions by reaching out to a tax firm.

Summary: Stopping IRS Wage Garnishments in Their Tracks

As you can see below, the best way to stop an IRS wage garnishment isn’t by ignoring or postponing it.

Method Does it work?
Changing Employer No
Quitting Your Job No
Paying Your Debts Yes
Negotiate an Installment Agreement Yes
Prove Financial Hardship Sometimes

 

The best way to stop an IRS wage garnishment before it even starts is to stand there and face it. And the smartest way to face it is with a team at your side.

FAQs about IRS Wage Garnishments

1. What’s the difference between a wage garnishment and a levy?

Technically, nothing. A levy is a legal action to seize something, and wage garnishments are one type of levy. The IRS also employs levies when they seize property, including homes, cars, or bank account contents. The IRS has the legal right to levy your wages to fulfill your tax obligation, so it’s common to hear “levy” and “wage garnishment” somewhat interchangeably.

2. Can a wage garnishment impact my bonus?

Yep. IRS wage garnishments take a portion of your regular, earned income. But bonuses aren’t considered regular income! Even if you regularly receive a regular end-of-quarter bonus of $500 or an end-of-year bonus of $5,000, technically this income does not stem from your hourly or daily work. For that reason, the IRS can swoop in and take the whole bonus..

Say Goodbye to IRS Wage Garnishments for Good

Now that you know everything about IRS wage garnishments that you need, let’s tackle your tax debt for good. Your debt isn’t going to disappear overnight, but getting in touch with a smart, professional tax mediation and tax relief company like StopIRSDebt.com can offer you the support and expertise you need.And the smartest way to face it is with a team at your side.

We’re always here for you. Remember that.

Ready to stop IRS wage garnishments in their tracks? Then get in touch via our free live chat. We’ll discuss your situation and help you reach financial freedom from the IRS.

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