You may have heard of wage garnishments in child support and other family law cases, but did you know that the Internal Revenue Service and state departments of revenue can garnish your wages—in some cases taking your entire paycheck—if you owe back taxes?
Unfortunately for taxpayers, both the state and the federal governments have the authority to take extreme measures such as wage garnishment in cases where taxes are overdue. Unlike wage garnishments that are based on other owed debts, a wage garnishment resulting from unpaid taxes can be put into effect without a court order. Also, unlike other types of debt that have a 5-year statute of limitation on collections, government tax authorities have up to 20 years to collect back taxes.
If your family is living paycheck-to-paycheck, or you have significant expenses such as extensive medical needs, the possibility of two decades of wage garnishment can devastate your family’s current and future financial stability.
However, there are steps you can take to prevent or stop a wage garnishment after it has been put into effect. With the help of an experienced tax representative, like the dedicated team of tax professionals at Key Tax Group, you can understand why and how your wages are garnished, as well as your options to prevent or stop a wage garnishment fast.
What is a wage garnishment?
An administrative wage garnishment, or wage garnishment, is when the state taxing authority or IRS enforces collection action on a taxpayer who owes back taxes. Garnishments are aggressive and can be devastating to the taxpayer whose wages are being garnished. There are very few restrictions once one has been ordered. The Department of Revenue or IRS will garnish your wages until the full amount of your debt is cleared, often leaving you with very little of your paycheck for other expenses.
If you have been notified of a state tax or federal tax wage garnishment, contact Key Tax Group immediately. Our professional tax specialists have more than 35 years of combined experience and the knowledge needed to effectively work on your behalf.
Why a Wage Garnished is Enforced
A wage garnishment can occur for several reasons. The most common causes of garnishment include:
- Failure to respond to the state tax authority or Internal Revenue Service in a timely fashion
- Failure to file tax returns
- Owing debt each year and not making the necessary adjustments needed in order to prevent new debts from being created.
More About State and Federal Wage Garnishments
If your wages are subject to garnishment because of outstanding tax debt, it is critical to establish a resolution before a garnishment is in place, especially when the tax debt is owed to the state. If the garnishment is the result of federal taxes owed, it can be stopped or changed, but in the case of state taxes, once a garnishment is in place, in most cases it will not be lifted until either your debt is paid or the garnishment expires. Depending upon the state, up to 40 percent of your gross income can be garnished. And, when a garnishment is in place, the only hope is to petition for a reduction of 10 to 12.5 percent by submitting your financials.
Under federal law, the IRS is allowed to take the following percentages from your wages until your debt is fully paid:
- If you have a W-2, it can take all of your wages except for $197 a week
- If you have 1099 income, the IRS can take 100% of your earnings, without leaving you anything
- If you are currently receiving Social Security income, the government will take up to 15% of your check
Contact The Tax Specialists at Key Tax Group for Your Tax Solution
Despite the devastating financial consequences of a wage garnishment, there are steps that can be taken to fight back and protect your rights and your money.
Whatever the reason for your garnishment, taking immediate action can help ensure that more of your hard-earned wages end up in your bank account and not in the IRS’s coffers. By acting within 30 days of receiving the Notice of Intent, or as soon as you are aware of the garnishment, you can prevent a wage garnishment or quickly come up with an alternative to garnishment, such as filing for bankruptcy or submitting an Offer in Compromise for a negotiated settlement amount.
By contacting the tax specialists at Key Tax Group at the first indication of garnishment, we can quickly assess your tax situation and develop a plan of action that is right for your family. With the experienced and skillful tax professionals at Key Tax Group by your side, you can feel confident that we will first ensure that the alleged tax debt amount is accurate and then move forward with an aggressive course of defensive actions that will stop the IRS or your state’s Department of Revenue fast in their tracks.
Don’t wait to protect your hard-earned wages or gamble on your family’s future. If your wages are at risk of garnishment or you would like more information on how we can help with wage garnishment, contact our office today for your free initial consultation. The free initial no-obligation consultations provided by Key Tax Group are confidential and your information will never be shared with a third-party. Schedule your free consultation today and say goodbye to your wage garnishment fast.
Frequently Asked Questions About Wage Garnishments
A: If the taxpayer files a Chapter 7 bankruptcy, the wage garnishment will be temporarily stopped under the automatic stay provisions for creditors under bankruptcy laws. Once the bankruptcy process is complete, however, the garnishment will go back into effect.
If the taxpayer files a Chapter 13 bankruptcy where his or her debts are restructured, the taxes due must still be paid but instead of the taxpayer's wages being garnished, the amount of tax debt owed will be added to the total repayment plan amount.
A: Taxpayers have several options (in addition to bankruptcy, explained above) to stop a wage garnishment. The taxpayer can set up a payment plan with the taxing authority or submit an Offer in Compromise—a negotiated lower payment amount—to settle the amount of debt owed. This process is best managed with the guidance of a qualified tax attorney.
A: The IRS has adopted a Taxpayer Bill of Rights that applies to all taxpayers and all interactions with the IRS:
- The right to be informed about all aspects of their tax case in a simple, easy-to-understand way
- The right to assistance from a taxpayers’ rights advocate, a tax lawyer, or other qualified representatives
- The right to procedural safeguards
- The right to quality service
- The right to pay no more than the correct amount of tax due and have the IRS or other taxing authority apply all tax payments properly
- The right to be informed of impending collections actions, if such actions require the sale or seizure of property or the freezing of assets and the right to a minimum of 30 days’ notice in which to pay the liability or seek further review
- The right to seek review, through formal or informal proceedings, of any adverse decisions and the right to seek a reasonable administrative stay
- The right to keep the taxpayer’s information confidential
- The right to installment payment agreements
- The right to a fair and just tax system
A: Unfortunately, your bonus check is also subject to the wage garnishment and it is possible that your employer will send your bonus directly to the IRS or state.
A: Generally (although there are exceptions), before the IRS can garnish your wages the following must occur:
- You have been assessed a tax liability and received a notice demanding payment of your tax debt
- You have either ignored the notice to pay your debt or refused to do so
- The IRS will send a “Final Notice of Intent To Levy and Notice of Your Right To a Hearing” a minimum of 30 days before the levy starts
A: In some cases, you can appeal a wage garnishment if you act quickly and request an appeal within 30 days of receiving your notice. You are potentially eligible for an appeal if:
- You have already paid your debt
- You received the Notice of Intent during an active bankruptcy case in violation of the automatic stay
- The statute of limitations on your debt (usually 20 years) has expired
- The wage garnishment was done in error and/or the tax assessment was done incorrectly
- You are eligible for relief from wage garnishment under the innocent spouse exception
- You were not given proper notice of, or sufficient time to appeal, the tax debt upon which the garnishment is based
A: Innocent spouse relief is an exception whereby an individual is relieved of owing tax debt and associated costs and penalties when a spouse or former spouse either made errors in reporting or failed to report items on their tax return. However, innocent spouse relief can only be taken when the income in question is individual income or self-employment taxes.
To qualify for innocent spouse relief, all of the following conditions must be met:
- Your joint tax return has an understatement of tax due to “erroneous items” (such as unreported income, or incorrect deductions or credits) of your spouse or former spouse
- You are able to prove that when you signed the tax return, you didn’t know nor did you have reason to know, about the understatement of tax
- Considering the totality of the circumstances, it would be unfair for you to be held liable for the resulting tax debt
- You, your spouse, or your former spouse have not taken part in the transfer of property as part of a “fraudulent scheme” (defined as a scheme to defraud the IRS or other taxing authority or another third party)
A: While taxpayers are legally allowed to attempt to resolve their wage garnishment on their own, it can be very challenging for most people to understand and navigate the complex tax laws. Further, most taxpayers aren’t able to dedicate the amount of time needed to resolve a wage garnishment in a timely manner. Finally, because of the devastating effects of a wage garnishment on a taxpayer’s family, having a qualified and experienced tax professional by your side can ensure that your rights are protected and that the tax debt you owe has been calculated fairly and accurately. Our tax professionals are ready and able to explain the garnishment process to you and provide you with alternative options that make sense for you and your family’s financial circumstances.
If you are facing wage garnishment, schedule your free, no-obligation initial consultation with one of our tax debt resolution experts.