Have you found yourself in a sticky situation with the IRS? Taxpayers who repeatedly fail to pay off their tax debt will suffer a multitude of consequences, and one of the most common is wage garnishment. Imagine receiving your paycheck, but to your shock, you’ve only gotten half of what you’re owed. This is the reality for those who have their wages garnished. If you’ve ignored IRS warnings, the government agency is fully within its right to approach your employer and ask them to siphon off a large chunk of your earnings. If there’s been a levy placed on your wages, it will continue to be enforced until you completely pay off your debt at a rate of 65 percent, unless you find a way to make a deal with the IRS.
Why Did This Happen?
If you’ve gotten a wage garnishment, you’ve already received a plethora of notices from the IRS, including a Final Notice of Intent to Levy. This final notice must go out at least 30 days before the government actually seizes your wages. This means that in most cases, a wage garnishment shouldn’t come as a surprise. The longer you ignore the IRS, the worst it gets, so it’s in your best interest to respond as quickly as possible.
Will I Lose My Job?
It’s embarrassing and scary to see your paycheck slashed in half, but having your wages garnished doesn’t mean your boss will fire you. The government passed an act called the Consumer Credit Protection Act, which prevents employers from dismissing their employees for a wage garnishment on a single debt.
Determining Your Disposable Income
If you haven’t paid your taxes and received a Notice of Intent to Levy, or your wages have already been seized, the first step is to contact the IRS. This conversation will require you to determine your monthly disposable income using budget apps like Mint. Unfortunately, what you consider to be disposable might be a much lower number than what the IRS is asking for. There are varied categories of disposable income, and the IRS will be taking a look at your income, expenses, and personal information to make their decision. Those who owe the government less than $50,000 can apply for a payment plan.
Other Payment Options
If you’re not able to pay your tax debt off in whole, you must work with a tax professional to determine the best course of action.
Your monthly disposable income comes into play in an installment agreement. This is essentially a payment plan that allows you to work towards paying off your debt. These payments are generally more costly than you might be able to afford over a long period of time. If you can show that you have no monthly disposable income, the levy may be released, but this is extremely rare and only approved in the most severe of financial circumstances.
Offer in Compromise
An offer in compromise sees the government settling your debt for less—meaning you pay much less than you actually owe. This is rare and hard to get approved, but if you are in dire financial straits, the IRS may forgive some of your debt. This option requires you to prove that you will never be able to reasonably pay off your debt, and in most cases, you’ll need the help of a skilled tax lawyer or professional to make a sturdy proposal.
Filing for Bankruptcy
We’ve all been taught to fear the word bankruptcy. But sometimes, bankruptcy is the answer. You should only decide to file bankruptcy after speaking with a qualified financial advisor; if you do, the moment you file, your wage levy will clear. Just keep in mind that bankruptcy can result in more permanent consequences that could be worse than the initial wage garnishment.
If your wages have been garnished or you’ve gotten a Notice of Intent to Levy, act quickly. Resolving your debt as quickly as possible is your best course of action, and with the right financial planning you’ll be prepared to handle the payment costs ahead. A tax company like Community Tax can help you present your case to the IRS and get you on the road to financial wellness in no time.