What exactly is wage garnishment?
If you have unpaid taxes, the IRS often uses wage garnishment to collect the debt. This court-authorized process requires your employer to deduct a specified portion of your earnings and send it directly to the IRS until your debt is fully paid.
Wage garnishment can cause significant financial hardship, leaving individuals with minimal disposable income. It’s a common method used by the IRS. For those already struggling financially, wage garnishment can be especially devastating. However, there are options to explore for removing IRS tax garnishment and potentially reducing your tax burden.
What amount of money does the IRS seize?
IRS wage garnishments often result in the deduction of 70% or more of your wages, without a defined upper limit on the amount they can take. Instead, they calculate an exempt amount based on your filing deductions and status using a specific tax formula. This exempt portion is intended to cover your necessary living expenses, with the remainder applied toward your debt.
IRS tables specify the exempt portion of wages, which vary depending on factors such as filing status and claimed exemptions. For example, a single individual with one exemption might retain only $845.83 from a $5,000 monthly income. Similarly, a married couple with six exemptions might keep approximately $3,000 monthly.
These examples illustrate how IRS wage garnishments can significantly reduce individuals' income, potentially worsening their financial difficulties.
What steps can you take to halt an IRS wage garnishment?
The key point to remember about wage garnishment is that preventing it is much easier than stopping it once it begins. If you foresee the possibility of wage garnishment, it's advisable to promptly contact the IRS to arrange a repayment plan.
However, if you are already facing wage garnishment, you will need an IRS Wage Garnishment Release to stop it. There are three main options to pursue for this release:
Pay your taxes in full.
Set up a repayment plan with the IRS.
Pursue an Offer in Compromise.
Among these choices, the Offer in Compromise is often preferred because it can lead to significant savings. It involves the IRS accepting a reduced payment amount based on your demonstrated inability to afford the current tax liability.
While appealing, gaining approval for an Offer in Compromise is highly challenging. The eligibility requirements are strict, necessitating proof of financial hardship such as job loss or substantial medical expenses. Additionally, if approved, it is crucial to adhere strictly to the agreed-upon payment plan, as failure to comply will revert to the original tax liability.
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