If you need IRS tax debt relief, you might need to know how to stop IRS wage garnishments. That’s because if you owe the IRS unpaid taxes, they can take a bite out of your wages. Of course, this doesn’t happen overnight. The IRS will send you letters for months before this will happen. That’s probably the most serious step the IRS will take against you before they try to send you to jail. The IRS would much rather find a friendly solution to your debt, and this is an important point to remember. They only garnish your wages when they think they have no other option.
What Not to Do if This Happens to You
Understand that your employer will have to comply with the IRS wage garnishment. If they don’t, they IRS will come after them for your debts. Typically, the IRS will take 25% or more of your income. They don’t care if you are left with enough to pay your bills or not. They just want their money. In most cases, it won’t even help if you are self-employed and are structured as a Professional LLC. (Even if your husband or wife is the person who is delinquent, the IRS could still come after you. Read “Innocent Spouse” for ways to deal with that problem.)
They are forced to leave you with some money, but not much. It’s probably not going to be enough for you to survive on. Of course, they’ll continue taking their cut until your debt (plus penalties and interest) is paid.
Believe me, if you can avoid the IRS wage garnishment, do it. You’ll pay less if you come to an agreement with the IRS than if you allow the garnishment to be put in place.
Before they garnish your wages, the IRS must demand payment for a tax liability and you must have failed to respond. Then, the IRS will send you a final notice of intent to garnish your wages 30 days before it starts. This is your window to act. Again, the IRS would rather come to an agreement with you, even accept less money, rather than garnish your wages. This isn’t because they feel bad about it. It’s because wage garnishment is an expensive process that gives them a bad rap. You can use this to your benefit.
How to Get a Wage Garnishment Release
1. Assume the position.
Before you get the IRS to play nice, you have to comply with their rules. That means you have to file taxes for every year.
2. Pay them off.
Obviously, if you pay all your debts, the IRS will call their dogs off you. Borrow the money or sell an asset. Do whatever you have to do (legally) to get these guys off your back as soon as possible. You’ll live a lot longer because of the stress release.
3. Make them an offer (in compromise) they can’t refuse.
This isn’t easy to get, but it’s worth a try. Basically, this is a situation where you get the IRS to accept less than what you owe. Before going down this road, you would be smart to hire a good tax attorney who has a lot of experience dealing with similar problems.
4. Make payments.
Often you can get the IRS to agree to an installment agreement. This will give you three years to pay off your IRS debt. Even if you don’t have a great credit score, as long as you haven’t flaked on previous debts, the folks at the IRS will probably let you go this route.
5. Plead poverty.
If you can convince the IRS that the wage garnishment causes financial hardship, they might let up — at least until your financial situation improves. If you can’t pay for basic living expenses as a result of the wage garnishment, you’ll probably get them to agree to wait. This is another case where a tax professional might be helpful. They usually know the exact formulas the IRS uses to determine if you face hardships that meet their definition or not.
6. Take the job and shove it.
Understand that the IRS wage garnishment is specific to an employer. If you change employers, the IRS has to get a new garnishment, and that will take them several months. This can also work if you simply quit your job temporarily. If your employer informs the IRS that you don’t work there, the garnishment won’t be valid. Then if they rehire you, the IRS will have to go back to get another garnishment. Too bad for them. Whaaaaa.
Another tactic is to work part-time. This might reduce your income to the level the IRS thinks is basic living.
7. The nuclear option
If you file for bankruptcy it will stop the IRS wage garnishment. Of course if you go this route, it will have a major impact on your financial life. Of course, you won’t get out of IRS tax debt, but it will stop the wage garnishment for awhile.
Have you ever had an IRS wage garnishment? How did you handle it?