Wage garnishment is a legal collection procedure in which a percentage of your wages is required to be withheld by your employer to repay a specific debt– in this case your tax liabilities. The IRS does not need a court order to start garnishing your wages, they just have to follow their procedure of sending out letters and notices to you to notify you of the debt and they can start collecting. After they send a Final Notice of Intent to Levy they can move forward with wage garnishment without further notice. If you have received this letter you should take action as quickly as possible to avoid the ramifications of this potentially damaging action by the government.
Who Can Be Affected by Wage Garnishment?There are several laws related to wage garnishment, with limits enforced by Title III of the Consumer Credit Protection Act. This not only limits how much of an individual’s income can be withheld, but makes it illegal for someone to be fired for garnishment over a single debt. The laws regarding garnishment in the United States apply to residents of all 50 states and the District of Columbia and apply at the state level as well.
These protections however, only go so far. If you are seriously facing wage garnishment because of back tax liabilities, it can have a substantial impact on your life. The garnish amount will be based on your filing exemption and gross earnings, which are the total after all federal and state withholdings, are removed. It does not include other withdrawals such as health insurance premiums, union dues, or retirement plan contribution.
Why to Be Scared of Garnishment for Tax Debts?There are specific formulas that are applied in addition to the above limitations by the IRS related to your filing exemptions. State tax authorities may garnish independently of the Federal Government and have their own limitations on such garnishments.
What is truly scary about the IRS and their ability to garnish wages, however, is the fact that they do not need to wait for a judgment. While they will always send a notice in advance, they can begin garnishing wages when the tax debt reaches a certain point having been unpaid. Combined with the varying laws in each state, it can be frustrating and confusing to figure out what you might owe and when it will be withheld from your paycheck.
If you are looking for back tax solutions or tax relief to help with an IRS problem, consider contacting The Tax Defense Group! Our Tax Professionals team has years of experience working with individuals and businesses with excessive tax debt that face potential wage garnishment actions by the IRS.