Resisting IRS Wage Garnishment for Unpaid Tax Debt
Updated: Jul 5, 2019
IRS Wage Garnishment - Unpaid Tax Debt This is the IRS stance on tax debt enforcement: “If you do not pay your taxes (or make arrangements to settle your debt), the IRS may seize and sell any type of real or personal property that you own or have an interest in. For instance … We could levy property that is yours but is held by someone else … such as your wages." The IRS really means it. The IRS "walks the walk".
It doesn’t take a genius to tell you that the IRS, the California Franchise Tax Board (FTB) or any other state taxing authority do not mess around. The all mean business. But that does not mean you are helpless. Resisting IRS wage garnishment for unpaid taxes is not always a futile endeavor. But, you have to know where you stand, and what you are doing.
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Tax-Based Wage Garnishment
The IRS and most state taxing authorities, including the California Franchise Tax Board DO NOT have to take the taxpayer employee to court and obtain a judgment to initiate the wage garnishment process (#IRSwagegarnishments). All they have to do is follow a simple notification process. All a taxing authority needs to do is mail out the notices. That's all there is too it.
Notice of Intent to Garnish
One reason resistance is not futile is that the IRS rarely acts by surprise. Before the IRS initiates a wage garnishment, it will (1) assess the tax and provide the employee taxpayer a formal “Notice and Demand for Payment," (2) give the employee taxpayer an opportunity to pay the tax, and (3) send the employee taxpayer what’s called a “Final Notice of Intent to Levy and Notice of Your Right to A Hearing." This tax levy or IRS garnishment notice affords the taxpayer at least 30 days to address the situation. Many states follow a similar process.
Normal Federal Protections Do Not Apply to Tax-Based Garnishments
The IRS can and will take as much as they can. That means that 100% can be seized.
When it comes to the collection of state taxes though, that is another matter. Each state has its own set of protections against excessive wage garnishment. Some limit the amount of the garnishment to 10%; others go much further.
The states of California, New York, Maryland and Georgia can be brutal on a taxpayer once they "get their hooks" into you.
The IRS and many state tax authorities do listen to cries of hardship. The federal tax code obligates the IRS to leave untouched an amount sufficient for the taxpayer to pay for basic living expenses and necessities. (But be aware: basic living expenses is perhaps a far cry from the manner in which the taxpayer is accustomed to living).
YOU COULD BE DECLARED CURRENTLY NOT COLLECTIBLE
Be prepared to provide evidence of hardship, such as bank statements, rent or mortgage due, or shut-off notices. Obviously family size, income being earned and expenses needed to survive without being tossed out on the street are highly relevant. However, the amount of wages protected will most closely correspond to the number of exemptions claimed for tax purposes. If the tax authority accepts this proof, the wage garnishment can be turned off immediately. Have the fax number or email address of the employer handy.
Short Reprieve for Employer and Hearing Rights
When served with a Form 668-W, the Notice of Levy on Wages, Salary and other Income, the employer has one full pay period before it is required to withhold the employee’s wages.
A TAXPAYER FACING AN IRS WAGE GARNISHMENT NEEDS TO BE PRO-ACTIVE IMMEDIATELY
There isn't a lot of time before you have little to any money, but it does provide some breathing room. During that time the employee has the opportunity to contact the taxing authority to work out a repayment plan and have the levy or garnishment lifted.
On your own, you will have two options at the IRS level. You could request an IRS manager to review the case, or you may request a so-called “Collection Due Process Hearing with the Office of Appeals." At that hearing, the officer will consider many factors in determining how to proceed, reduce or terminate the garnishment. These include: prior payments, bankruptcy, procedural errors in the assessment, the statute of limitations, any prior opportunity to dispute the assessment, and repayment/collection options.
If the taxpayer disagrees with the hearing officer’s decision, he may file a lawsuit to challenge the determination.
THE BIG "TAKE-A-WAY" - GET A TAX ATTORNEY
Without question, contacting an IRS Tax Attorney is the best advice for dealing with tax authorities (IRS and state) effectively, as your Tax Lawyer will know best how to navigate these troubled waters. It isn't required that you have representation by a Tax Attorney, but, you will be far better off than trying to go it alone.
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