IRS Garnishing Wages? Guide to Stop IRS Wage Garnishment

stop or release IRS wage garnishmentThe most effective way to stop or release IRS wage garnishment is to set up some agreement or resolution with the IRS. Filing compliance is usually a requirement. However, the best course of action regarding stopping or preventing an IRS wage garnishment depends on where the IRS is in levy process, your financial and tax compliance situation.

How to Stop IRS Wage Garnishment Temporarily

If the IRS sent you a “Final Notice” letter regarding a levy, this usually means that the IRS has not levied your wages or bank accounts yet but intends to do so.

You are looking for the words “Final Notice” with a threat of levy on the notice as this will indicate the IRS intends to levy your bank, wages or federal payments if you take no action. Here are some examples:

  • IRS Letter 1058 – Final Notice Reply Within 30 Days
  • Letter 11 – Final Notice of Intent to Levy and Notice of Right to a Hearing
  • CP90/297 – Final Notice of Intent to Levy (usually used to levy social security or other federal benefits)

Appeal and Request a Collection Due Process Hearing

You have the right to appeal the tax levy before or after the IRS places the garnishment. Usually, before the IRS levies, they need to notify the taxpayer of their rights to appeal beforehand. There are exceptions though.

The letters above inform you of your rights to a hearing. If you request a Collection Due Process (CDP) hearing in time, the IRS cannot levy you while they process your appeal. It could take a few months. However, to request a CDP hearing in time, it must be postmarked within 30 days after the date of the Final Notice.

You can request a hearing after 30 days has passed as the IRS may honor it. The benefit here results from the statute of limitations (time for the IRS to collect) continuing to tick because it is technically now an “Equivalent Hearing,” which can be requested up to 1 year after receiving the Final Notice of Intent to Levy. However, you cannot go to court to challenge the IRS Office of Appeals’ decision and the IRS can still garnish wages. The IRS IRM (Internal Revenue Manual, 8.22.4) directs employees to suspend levy action unless “Collection determines it to be appropriate.” It is contrary to IRS Publication 660 that states “an equivalent hearing request does not prohibit levy.”

Regardless, requesting a hearing is only a temporary solution to prevent or lift the levy. The IRS will typically put you in contact with an IRS Settlement Officer whose job is to settle the case. Therefore, you will need a long-term solution worked out. It is best to work with a licensed tax professional (EA, CPA, or tax attorney) so he can analyze all your options, and you get the best outcome.

Appeal Through the Collection Appeals Program (CAP)

You have the right to appeal through the Collection Appeals Program (CAP) before and after the IRS garnishes your wages. It is usually faster than a Collection Due Process hearing, but you cannot use this process if you disagree with the amount due. Also, if you don’t like the determination, you can’t take the case to the Tax Court. To appeal with CAP, submit Form 9423 (Collection Appeal Request).

File Bankruptcy

When you file bankruptcy, the courts issue a stay which prevents the IRS from taking your wages. However, this is only a temporary solution. Bankruptcy gets rid of some tax debt, and in many cases, bankruptcy does not get rid of any tax debt. To be discharged, the debt must meet several criteria. Most importantly, it must be income tax debt, and it must be more than three years old.

Additionally, bankruptcy has grave repercussions for your credit history. If you solely have tax debt, carefully reconsider bankruptcy. Before making your decision, consult with a tax attorney or a bankruptcy attorney.

Get Declared Uncollectible

If you can barely make ends meet, you can apply for a hardship or currently not collectible (CNC) status with the IRS. You’ll have to provide full financial disclosure in most cases, but if you qualify, the IRS temporarily pauses all collection activity. Again, consult with a tax professional.

Set Up a Long-Term Solution to Stop or Release IRS Garnishment

Whether before or after a wage garnishment, an appeal in most cases will require a long-term resolution to be worked out.  A tax professional can help you set up payments to cover all or part of your debt, and if you don’t have any money, you can apply for hardship status. Aside from working with the IRS, there are a few other steps you can take to stop wage garnishment. Here are the main options.

Pay the IRS in Full

Paying in full immediately stops the wage garnishment. Some taxpayers take out loans so they can make a full payment. Sometimes, if you have a tax lien as well, you can refinance your home (if you have equity) and subordinate the tax lien to pay off your taxes.

Enter into an Installment Agreement

An installment agreement is where you make monthly payments on your tax debt. Usually, IRS monthly payments are much less than the amount the IRS garnishes per month. If you owe less than $50,000, you can apply online and take up to six years to pay off the tax debt. As of 2018, the IRS is testing expanded criteria for streamlined installment plans, and if you owe up to $100,000, you can take up to eight years to repay.

Request an Offer in Compromise

An offer in compromise is when the IRS lets you settle your tax debt for less than you owe. You have to provide detailed financial information to get this type of resolution. To increase your chances of success, you should work with a tax professional. Typically, the IRS stops the wage garnishment while it reviews your application.

Apply for Innocent Spouse Relief

Usually, when two people file married filing jointly, the IRS holds both people responsible for the debt. However, there are exceptions to this rule. If you believe your spouse or ex should be held partially or exclusively responsible for the debt, you can apply for innocent spouse relief.

File Bankruptcy

When you file bankruptcy, the courts issue a stay which prevents the IRS from taking your wages. However, this is a temporary solution. Bankruptcy can get rid of some tax debt, and in many cases, bankruptcy does not get rid of any tax debt. To be discharged, the debt must meet several criteria. Most importantly, it must be income tax debt, and it must be more than three years old.

Additionally, bankruptcy has grave repercussions for your credit history. If you solely have tax debt, carefully reconsider bankruptcy. Before making your decision, consult with a tax attorney or a bankruptcy attorney.

Take Steps the Limit the Impact of the Wage Garnishment

There are several steps you can take to reduce the effect of the wage garnishment. Ideally, you should not take any of these actions, but looking at them can help you understand how the wage garnishment process works.

Decrease Your Income — The IRS allows you to keep some of your earnings. If you don’t want any of your income garnished, you can reduce your income so that it is under the threshold. However, if you have assets or property, the IRS may decide to go after that instead.

Change Your Employer — This strategy can work for a short amount of time, but remember, when you start a new job, your employer sends tax information to the IRS. Once the IRS realizes you have a new employer, the agency will notify the new employer about the garnishment.

Temporarily Quit Your Job — Some people try to quit their job temporarily. Then, when their boss rehires them, they have a small window amount of time before the garnishment starts again.

Get Help From a Tax Professional

Dealing with a wage garnishment is stressful and confusing. Unless you make payment arrangements or get hardship status, the IRS will garnish your wages until you satisfy the tax debt, plus interest and penalties. When you work with a tax professional, they can help you find a solution that works for your financial situation.

The IRS likes working with professionals and often gives professionals better deals than ordinary taxpayers.

Wage Garnishment Release & Help

 

IRS Wage Garnishment Information
Understand how a wage levy works, the process, the laws, finding help and how to stop.

IRS CP Notice 90/297 Notice of Intent to Levy
What this notice means and what to do. A notice of intent to levy should not be ignored. The IRS will levy unless action is taken on the taxpayer’s end.

Wage Garnishment Help
Do you need help stopping a wage garnishment? Stop the garnishment quickly with the assistance of our experienced team of tax professionals. Understand the benefits of hiring a tax professional to help with your garnishment.

IRS Wage Garnishment Rules
Understand how IRS wage garnishment works and the different laws and rules associated with the garnishment of your wages.

What If the IRS Garnishes My Wages?
Understand your options of what you can do if the IRS garnishes your wages. If the IRS is garnishing your wages it means you have not resolved your tax debt. Follow these steps to stop the garnishment and settle taxes.

Appeal IRS Tax Levy
If you don’t agree with the IRS’s choice to levy you have the legal right to appeal. Understand how to file an appeal and how the process works.

Settle Back Taxes
Ways to settle your taxes owed with the IRS to get back into good standing.

More Tax Levy Information
Other forms of IRS Levy. Solutions to dealing with different forms of IRS levies.

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