When taxpayers owe the IRS and are not in an arrangement to pay (extension to pay, payment plan, currently not collectible status, or an offer in compromise), they can be subject to a levy of their income and assets. One of the most common forms of levy is the “wage garnishment.” Since July 2018, the IRS has started to increase the number of wage garnishments to taxpayers who do not make arrangements with the IRS.
IRS started issuing more wage garnishments on July 17, 2018
Some insights and tips on garnishments
With more garnishments in place, here are insights and tips taxpayers need to know about IRS wage garnishments and how to get them released:
The IRS knows where you work. The IRS knows a taxpayer’s income sources and most financial account information. The IRS collects all income sources from employers from prior year’s wage and income information returns (i.e. Forms W-2 and 1099). The
IRS issues wage garnishments using this information on file from the most previous tax year.
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The IRS usually provides 5 notices, over several months, before issuing a garnishment. These notices, called the IRS collection notice stream, provide the taxpayer several attempts to pay or get into a collection alternative with the IRS. Once a garnishment is issued, the IRS is usually inflexible about releasing it because the taxpayer has been given numerous changes to pay or enter into an agreement to avoid the garnishment.
Surprise! Your employer will notify you of the garnishment. The IRS does not provide the taxpayer notification that a garnishment has been issued. The IRS issues it directly to the employer who notifies the taxpayer of the garnishment.
There are 3 ways to release a garnishment. There are three reasons that the IRS removes a wage garnishment: pay the balance in full, enter into a collection agreement, or prove to the IRS that the garnishment is causing a hardship. Most enter into a collection agreement.
Filing compliance is required. This means, you better have all of your required tax returns filed. Unless the taxpayer is in hardship, the IRS is reluctant to release a garnishment if the taxpayer has not filed all past, required returns (usually the current and past 6 years). Sometimes, the IRS will allow the taxpayer to use an extension to pay to release the levy if the taxpayer can show that the prior years will be refunds and they promise to file immediately,
Insider tip: You can use an extension to pay (ETP) to remove a wage garnishment. If the taxpayer has not used a prior extension to pay agreement, the IRS will usually allow the taxpayer to use the ETP agreement to release the levy. However, if the taxpayer has not followed through on past agreements, the IRS is less likely to allow the ETP for a garnishment release.
The garnishment stays in place until released. Good news – the IRS will not take 100% of the wages. The bad news: the wage garnishment will continue until all balances are paid or the taxpayer gets into an agreement with the IRS and the IRS sends a garnishment release to the employer.
Need to work with IRS Collection because you are under IRS enforcement. The IRS is enforcing collection of back taxes. A Wage garnishment is a serious matter. The garnished taxpayer is assigned to IRS collection for enforcement of unpaid taxes.
Taxpayers will need to work with the IRS Collection function for a release. Also, further enforced collection can occur- likely in the form of a Notice of Federal Tax Lien. It is unlikely that the IRS will also issue additional levies – such as a bank account levy – unless the taxpayer is assigned to an IRS revenue officer for local field collection.
Can’t put food on the table? The taxpayer can request expedited release of a garnishment due to economic hardship. Taxpayers who cannot meet their basic living expenses and can provide the IRS evidence of hardship can ask for a hardship release without getting a collection agreement. However, in practice, this process can take some time, especially if the initial IRS reaction is “we need more information about your hardship before we can release the garnishment.” Most times, it is best for the financially stressed taxpayer to request currently not collectible status or even request
an offer in compromise – both will release the garnishment.
Use the fax for an expedite garnishment release. Once the taxpayer qualifies for a release, the fastest way to get the release to the employer is to ask the IRS to fax it to the employer while on the call. (Note: a garnishment release by mail can take 7-10 days). The taxpayer should be prepared to provide the IRS their employer’s phone, fax, and payroll contact information for the IRS to release the garnishment while on the call. Taxpayers should always follow up with the employer to make sure the release is received.
The IRS has a Christmas spirit. Traditionally, the IRS does not issue wage garnishments during the last three weeks of December. Clearly, the IRS has a heart here – but there are other motives. The IRS does not have a lot of resources available to arrange for a collection agreement and garnishment release during Christmas time. There are usually many IRS employees on vacation during the latter part of December. One word of warning: the wage levy holiday moratorium does not include bank levies. Taxpayers are still subject to a bank levy.
The Taxpayer Advocate (TAS) can help, a little. TAS can help if the taxpayer is suffering a financial hardship. But ultimately, a wage garnishment is under the jurisdiction of IRS Collection. TAS can make recommendations and expedite hardship requests, but IRS Collection makes the final decision on releasing the garnishment.
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Advance Tax Relief is headquartered in Houston, TX with a branch office in Los Angeles, CA. We help many individuals just like you solve a wide variety of IRS and State tax issues, including penalty waivers, wage garnishments, bank levy, tax audit representation, back tax return preparation, small business form 941 tax issues, the IRS Fresh Start Initiative, Offer In Compromise and much more. Our Top Tax Attorneys, Accountants and Tax Experts are standing by ready to help you resolve or settle your IRS back tax problems.
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