IRS & State Tax News, Updates, Opinion, Guidance, and More» wage garnishment

Tax Wage Garnishment: What to Expect with IRS Taxes Owed

Debra Dragon — Wed, 24 Mar 2010 13:09:03 +0000

Owing back taxes can be a very frustrating situation when you do not have the money all at once to pay off the debt. If you are behind on your state and/or federal taxes, it is not uncommon to have a tax wage garnishment implemented through your employer to collect the money owned. Wage garnishment can be filed by the tax office and an employer will be obligated to collect a percentage from each paycheck until the debt is satisfied.

A garnishment means that the tax office can legally take the majority of your paycheck before you get any of the money. For those living paycheck to paycheck, a garnishment is a serious matter. The percentage taken in a garnishment from the IRS is generally a large one and will be based on your marital filing status as well as the number of dependents you claim. The amount of your pay that is exempt from the garnishment is figured out by adding the standard deduction claimed on your taxes and the amount you claim as exemptions. That number is then divided by 52. A typical example would be the calculation of a family of three. After their calculations were done, they would only be able to keep around $325 per week per pay. State tax garnishments have individual standards for the amount of percentage they can take towards the debt.

Since the loss of pay will be a bigger burden on an already stressed financial situation, it is important that anyone owning federal or state tax money do whatever they can to take care of the debt before a garnishment is ordered. Installments plans or even legal assistance from a tax attorney can help avoid a garnishment situation before it occurs. Once a garnishment is started, it will stay in effect until fully paid. Otherwise, additional costs of legal assistance will only add additional financial burdens.

Tax attorneys can help to deal with the IRS or the state in order to negotiate a release of the garnishment. Alternative payment amounts may also be negotiated to make the garnishment less severe but again the attorney costs add to the debt already outstanding. However, if you contact the IRS or state tax office as soon as you know you’ll have difficulty making payments, you can avoid the garnishment and the difficulties that come with losing most of your paycheck each week until the debt has been satisfied.

Tax Services: Use a Large, Nationwide Firm or Small Local Firm?

Manny Davis — Tue, 01 Sep 2009 23:36:59 +0000

If you have tax problems and are looking for professional help it is important to find a reliable tax company to help. There are many companies out there that can help, large and small. Both large and small companies have their benefits. Depending on what you are looking for in a tax company and what your tax situation is should determine what type of company you should use.

Small tax firms are typically better for establishing a long standing relationship to file taxes and maintain accounting records. If you own a business and you need someone to help maintain your books and do normal tax filings that every business needs to make, it is a good idea to go with a local company since this will be an ongoing relationship. Even if you are looking for a professional to help with tax returns and general accounting a local tax firm would be the way to go. Small firms are not better for handling complex tax debt and back taxes issues. Small, local tax companies tend to focus on the normal tax filings and don’t have the manpower and expertise needed to efficiently and effectively handle the complex tax issues that are not seen as frequently.

Large tax firms that serve individuals nationwide have a great advantage over the small tax firms that tend to serve local communities. These large tax firms are able to achieve efficiencies on more complex tax issues. Many of the large firms will hire a variety of different tax professionals (Tax attorneys, CPAs, Enrolled Agents, CPAs & Ex IRS Agents) to handle complex tax issues such as unfiled tax returns, large amounts of tax debts, tax levies, tax liens etc on a daily basis. A tax professional that handles tax levies every day is going to be more efficient and effective than a tax professional that handles them occasionally. Most small firms only see these types of cases occasionally, so it would be a wiser choice to go with a large firm in these cases. Large firms are typically cheaper as well because they know how to navigate IRS issues quicker and more efficient, therefore billing out less total hours on your case. Below are some instances where it would be a good choice to hire a large tax firm that helps individuals nationwide:

Most people have an apprehension to using a large tax firm that they cannot sit down with directly because they are not local, they shouldn’t. Tax cases are slow moving and are all done by mail and email and there is no need to use a local firm. Everything can be done more efficiently over the phone and through email. Hiring a large nationwide tax firm is a great idea to resolve complex tax issues because you have all the best resources and professionals in one central location to help you with your problem.

Federal Tax Levy: Steps to Resolution with the IRS

Manny Davis — Mon, 29 Jun 2009 22:21:28 +0000

Every year, thousands of letters are sent out letting taxpayers know that the Internal Revenue Service means business. These letters (CP 90/CP 297), in consideration are often referred as an IRS Intent to Levy. A Federal Intent to Levy means that the IRS is going to try to recover or collect back taxes in a more coercive manner. This forceful collection method translates into the IRS either taking a good portion of your paycheck (referred to as Wage Garnishment) every month or seizing part of all of your bank account (called a bank account levy).

With regards to an IRS bank account levy, the IRS will typically seize whatever is needed for the repayment of your back taxes or unpaid taxes. They will begin by notifying your bank and having your bank hold or freeze funds for twenty-one days. After 21 days, your bank will send the funds to the Feds. Therefore, if you have received any type of notice from your bank or the IRS about your bank account being levied it is in your best interests to immediately deal with the situation before it’s too late. You will need to pursue a Federal Tax Levy Release and it most cases, a professional knows the forms and procedures to follow.

With a Wage Levy or IRS Wage Garnishment, the IRS will send notice of their intention to taking a part of your paycheck to your employer. Your employer MUST comply with the IRS under federal Law and make deductions from your wages as necessary. Strong professionals, like our firm’s partners, will in most cases be able to release wage garnishment in three to five days.

To release any levy, you or your professional will need to complete various forms. However, before anything is done you must be in compliance with the IRS. That means, that all tax returns that you have outstanding must be filed with the IRS before anything. Therefore, you need to know what years, if any, you did not file and make sure to complete the necessary tax forms.

Contact the IRS to see if you are in compliance (make sure to not disclose financial accounts or bank accounts etc as again the IRS will take advantage of every opportunity to seize your funds). An advantage of a professional here is he or she can call the IRS and shield you from questions the IRS agents are trained to ask. Knowing the limits here is important.
If you are are not in compliance, file the appropriate tax returns or have your IRS professional do them. In order to further penalties and interest, fax those returns to to the IRS so you can immediately get into compliance with the IRS.
Once you’re in “compliance” with the IRS, the next step is to figure out a form of settling IRS taxes owed. Settlement can be paying less than you owe or just pertain to an IRS Payment Plan, such as an IRS Installment Agreement, whereby you obtain an agreement with the IRS that you will pay them over time instead of all at once. Settlement mechanisms, where you pay less than you owe, can also be pursued depending on where you stand financially. These “settle for less” methods pertain to a Partial Payment Installment Agreement (PPIA), an Offer In Compromise, getting declared Uncollectible and so on.
In conjunction with Step 3 above, you will need to work with your tax professional or fill out form 433F (if your situation is being dealt with by the IRS Automated Collection System) or form 433A if you are dealing with a field agent. Form 433 is your Collection Information Statement. Form 433 will detailed all your assets, income, liabilities, etc.

If you’ve been notified by the IRS, do something about it. It means the IRS has started their notorious automated process of collection and they will not subside until your back taxes are paid or you have an “agreement” of some type (discussed above) to repay them. If you have been informed by the IRS of a tax levy, have had your bank account garnished or your wages, start by signing up for a free tax analysis by using the “get quote” form on the right. Our partners will call you, diagnose your situation, make recommendations and let you know the cost of utilizing our services at no obligation or cost to you. Our services are structured so that our services only make sense financially – i.e. we will save you more money and headache then if you tried to handle the situation on your own.