FAQs on wage garnishment to collect tax debt

If you get behind on your taxes, the IRS could try to go after your paycheck to collect the debt.

In this post, we'll address frequently asked questions about this process.

 What does "garnishment" mean exactly?

Garnishment is an old legal term for the procedure used to take property to pay a debt. In the case of wage garnishment for tax debt, the term the IRS uses is "wage levy."

With most debts - such as car loans or mortgages - the levy procedure involves the creditor getting a court order before seizing the property.

For tax debt, however, the IRS does not have to go to court first before taking part of your paycheck.

If the IRS doesn't have to go to court, what procedural steps does it have to take before taking your wages?

There are several steps the IRS has to take. First they have to send you a tax bill, known formally as a Notice and Demand for Payment. If you don't pay or make arrangements to pay, they have to send a levy notice to give you 30 days warning about the levy. This notice is called a Notice of Intent to Levy and Notice of Your Right to a Hearing

How much of your paycheck can the IRS take?

Under the Consumer Credit Protection Act, there are limitations on the amount the IRS can take. The IRS will mail information to your employer about how to calculate the exact amount. This information is in Publication 1494, which explains how much of your wages are exempt from levy.

How can you avoid a wage levy or get it released?

If you aren't able to pay your taxes in full, you can still avoid a levy or get it released by making an arrangement to pay your back taxes. Many taxpayers do this with an installment agreement, where you make payments monthly over a period of time or an offer in compromise (OIC). If the IRS accepts it, an OIC enables you to resolve your tax debt for less than the full amount owed.

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