Can the IRS Garnish Wages?

Sunday, April 2nd

Few agencies can strike fear into the hearts of Americans in quite the same way the IRS does.

Rumors abound when it comes to the long-arm of the IRS. One of the biggest rumors is that if taxpayers make a mistake on their tax return, the IRS will audit them. Another popular rumor is that the IRS can send you to jail for minor tax infractions.

While it's true that making outrageous claims on your tax returns, such as donating 50 percent of one's income to charity, will often cause the IRS to examine your return more closely, taxpayers should not be afraid to claim legitimate deductions for fear of being audited.

However, one of the powers the IRS does possess is the ability to garner wages for past-due taxes. Like any other creditor, the IRS has the ability to recover what is owed. However, unlike other creditors - which must first obtain a court judgment before garnishing wages - the IRS is not required to first get a judgment before it may garner taxpayers' wages.

Taxpayers who are about to have their wages garnished will first receive notice from the IRS that the action is about to occur. That notice will come in the form of a written document which contains the amount owed to the IRS. The IRS is required to itemize the full amount, indicating how much is the actual tax owed, how much is penalties for failure to pay and how much of it is interest.

The notice also will include a date by which payment in full is expected. If payment is not received by the date specified on the notice, the IRS will then take action to collect the monies owed. Actions they are permitted to take include the seizure of assets, the placing of liens on a taxpayer's property, garnishing wages or claiming future tax refunds.

While federal law limits the amount of money creditors can take directly from a person's wages, the IRS is not subject to those same guidelines. Tax code simply dictates what the IRS must leave taxpayers whose wages they garnish. Basically, a taxpayer will be left with only what the IRS deems is necessary for the payment of their basic needs.

So what happens if you are one of those taxpayers who owe a significant amount in back taxes? Can you automatically expect to have your wages garnished?

The good news - if there is perhaps ever any good news when the IRS is involved - is that wage garnishment is usually a last resort for the IRS. Taxpayers who attempt to work with the IRS to pay what they owe will find the process a lot easier than having their wages garnished.

One of the most popular options is for taxpayers to enter into what is known as an installment agreement with the IRS. Taxpayers who agree to an installment repayment plan are seen as being in compliance, and the IRS is less likely to take a harsher course of action - like wage garnishment - to recover back taxes. The only down side to an installment plan is that interest continues to accrue on the total amount owed while taxpayers are making payments, similar to what happens when a person makes only the minimum payment on a full credit card balance.

Those who are facing the possibility of wage garnishment from the IRS may wish to consult a reliable tax relief agency or professional legal counsel to determine which option is best for them.

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Tax Relief Company FAQ

What is tax relief?

Tax relief is a means of reducing what you owe to the IRS and state in back taxes. Your debts can be negotiated and payment plans may be established to help you pay it in a more manageable amount and timeframe.

Do I qualify for tax relief?

You'll probably need to owe at least $10,000 in state and/or federal taxes to be eligible for tax relief. There usually aren't any other requirements.

Why should I use a tax relief service? Can't I do it all by myself?

You could work directly with the IRS to work out a 3-year payment plan, but that usually only applies if you've filed all of your previous years' tax returns and you owe less than $10,000 in taxes. Using a tax relief service eliminates the guesswork and walks you through the entire process from start to finish. Plus, you don't have the stress of meeting with the IRS: your representative at the tax relief company does all of that for you!

How much does it cost to get tax relief?

Most services offer a free initial consultation, to determine which of their plans (if any) are the right fit for your situation. Once you've chosen a tax relief strategy, the provider will probably charge up to 20% of what you saved in debt as a service fee, but that varies from one company to another.

What should I expect once I sign up for a tax relief service?

Your representative will go to work on your behalf, using a variety of methods to work with the IRS and state taxing authority. These may include Offer in Compromise, Penalty Abatements, Tax Lien Subordination and more. Some services will assign you a dedicated representative who will keep you updated on your case's progress.

How long will it take to see changes take effect?

As you'd expect, it depends on the complexity of your situation. However, a general rule of thumb is between two and six months for a tax relief plan to be fully executed.

Is there a guarantee?

Some tax relief services offer their customers a satisfaction guarantee - but it's often a very small window of time compared with how long it takes to see a significant change in your tax debts. It's a good idea to look at the reputation of any service you're considering, to see what previous clients have said about the effectiveness, and reliability of the programs offered.

Are tax relief companies legitimate?

Most of them are. It's not difficult to find tax relief partners that have been helping consumers for decades. That being said, there are opportunistic scammers who would like nothing more than to convince you that they're legit and then take your money without offering any tax relief whatsoever. You should research the provider before signing on the dotted line, which includes looking up their rating from the Better Business Bureau.