IRS Wage Garnishment Notice: How to Deal With It?

A wage garnishment notice is a serious matter that requires a prompt response and working with the IRS to resolve outstanding tax debts. With the help of a wage garnishment lawyer, you can negotiate a payment plan or challenge the notice. This post is restricted to wage garnishing by IRS for debt collection, so it does not cover wage garnishing under other laws or purposes. If you want to know about other situations, please read federal wage garnishment guidelines.

What is an IRS wage garnishing notice?

A wage garnishment notice is a formal notification issued by the Internal Revenue Service (IRS) to employers, informing them that they must withhold a portion of an employee’s wages to pay off a delinquent tax debt. 

Under section 6331 of the Internal Revenue Code, the IRS is authorized to issue a levy by collecting the total amount of the taxpayer’s unpaid tax, including failure to pay the penalty and interest on unpaid tax. The levy can be applied to any taxpayer’s wages or other income, including salaries, wages, commissions, and bonuses.

When does IRS issue a notice of wage garnishment?

The notice of wage garnishment is issued to the taxpayer after the IRS has made multiple attempts to contact the taxpayer regarding the unpaid taxes. The IRS will send the taxpayer notices demanding payment, including a final notice of intent to levy. Before issuing a levy, the IRS must provide the taxpayer with a written notice of its intent to levy, which includes information about the taxpayer’s rights to appeal the proposed levy. The taxpayer has 30 days to request a hearing before the IRS Office of Appeals to challenge the proposed levy.

Suppose the taxpayer does not respond to the notice of intent to levy or does not request a hearing within the allotted time. In that case, the IRS may issue the wage garnishment notice to the taxpayer’s employer.

What happens after the notice is issued?

The purpose of garnishing wages is to collect tax debt from a taxpayer. So, The IRS uses Form 668-W to notify an employer that they must withhold a portion of an employee’s wages to pay off a delinquent tax debt. The taxpayer’s employee is legally bound to comply with the order to withhold a part of the employee’s wages and deposit with the IRS. The employer must continue withholding wages until the tax debt is paid in full or until the IRS releases the garnishment order. This way, IRS recovers the tax debt, although it can not get all the salary because of a limitation on garnishing the wages.

What can you do if you receive a wage garnishment notice?

Several options are available if a taxpayer receives a notice of wage garnishment. But, if you don’t have the confidence in dealing with IRS notice, your best bet is to hire a wage garnishment lawyer, as they have the qualification and experience to deal with the onslaught of the IRS for collecting tax debt. Anyway, here are options for you : 

1. The first thing is to check if the tax debt for which the garnishee order is made to the employer is correct. If you disagree with the proposed wage garnishment or other collection action by IRS, you should file Form 12153, Request for a Collection Due Process or Equivalent Hearing, to IRS to request a hearing with the IRS.
2. If you have no objection to the tax demand in the notice, arrange a payment plan to IRS. Sometimes, the IRS may be willing to negotiate a settlement or allow the taxpayer to make smaller, more manageable payments over time.
3. If a payment plan is not possible, the taxpayer may seek legal advice from a tax attorney or consult with tax debt lawyers or wage garnishment lawyers. It may be possible to challenge the wage garnishment notice or negotiate a lower payment amount. It is essential to act quickly, as wage garnishment can significantly impact a taxpayer’s financial situation.

What is the limit on wage garnishment?

There is a limit on wage garnishment, as established by federal law. The Consumer Credit Protection Act (CCPA) provides important protections for employees facing wage garnishment, including limitations on the amount that can be withheld from their earnings.

CCPA limits the amount that can be garnished from an individual’s wages. Currently, the limit is the lesser of 25% of the employee’s disposable earnings or the amount by which the employee’s disposable earnings exceed 30 times the federal minimum wage. This means that individuals cannot have their entire paycheck garnished, and some earnings are exempt from garnishment.

How to go for a payroll deduction agreement with IRS?

To apply for Form 2159, Payroll Deduction Agreement, you can follow these five steps:

1. Contact the IRS: The first step is to contact the IRS to discuss your tax debt and your options for resolving it. You can call the IRS at the phone number provided on any tax notice you have received or visit a local IRS office in person.
2. Complete Form 433-F: Before applying for a Payroll Deduction Agreement, you must provide the IRS with information about your financial situation. This is done by completing Form 433-F, Collection Information Statement. This form asks for details about your income, expenses, assets, and liabilities.
3. Discuss payment options with the IRS: Once the IRS has reviewed your Form 433-F, they will discuss your options for resolving your tax debt. If a Payroll Deduction Agreement is viable, the IRS will provide you with Form 2159 to complete.
4. Complete Form 2159: Form 2159 is a simple form that requires your name, address, Social Security number, and employer information. You will also need to indicate the amount you wish to pay each pay period and the start date of the deduction.
5. Submit Form 2159 to your employer: Once you have completed Form 2159, you will need to submit it to your employer. Your employer will then begin withholding the specified amount from your paycheck and sending it directly to the IRS.

Is the payroll deduction agreement the best option?

There may be better options depending upon the facts and circumstances of your case, for resolving a tax debt than a Payroll Deduction Agreement. You should discuss your situation with the IRS and consider your options before agreeing to a Payroll Deduction Agreement. It is also a good idea to seek professional advice from a tax professional or financial advisor to make the best decision for your situation.