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IRS wage garnishment: A continuous levy

Debt is not all created the same. Certain creditors - the IRS for example - have additional powers to collect past due balances. Failing to deal with a tax problem could mean the agency seizes your wages or even Social Security benefits.

What is the process to levy wages? How much can the IRS take each pay period? When does wage garnishment stop? Do you have any rights? We’ll answer these basic questions in this post

Form 668-W

The IRS has a form for just about every situation. In this case, it will send a 668-W to your employer requesting certain information. Your employer returns information about your filing status and exemptions that is used to calculate how much can be seized.

Returning correct information will affect how much you are left with to pay the other bills. If you have a family of four and file married filing joint with four exemptions, you receive more than the default of married filing separate with one exemption. This difference can hundreds of dollars each month.

One-time bonuses and commissions do not qualify for any exemption. If your employer pays out bonuses in March, do not expect one if your wages are being garnished by the IRS.

The Federal Payment Levy Program can also take up to 15 percent of federal payments – think Social Security retirement benefits. 

Levy release

A levy on your earnings is continuous until released. In general, three ways exist to stop the IRS from seizing your pay, they include:

  • Making other payment arrangements such as an installment agreement
  • Paying the balance due
  • Requesting a levy release if it causes economic hardship

But even after a levy release you would still owe the debt until it is paid or the collection window (usually 10 years) expires.

Taxpayer rights

You have the right to be informed through a Notice of Intent to Levy. Wage garnishment should never come as a complete surprise. You also can challenge the action through a Collection Due Process.

Another important right is to retain representation from a tax attorney. Working with an attorney may be one way to reduce penalties and interest that quickly tack on to increase your balance due.

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