Having the IRS back Taxes owed is not a good start. If you owe back taxes to the IRS, they may garnish your wages. IRS wage garnishment is a process that allows the IRS to take money from your paycheck if you owe back taxes.
How does IRS wage garnishment work?
The IRS will send you a notice of levy and give you 30 days to pay what you owe or face having all of your wages garnished. If you do not pay what you owe in full within 30 days, the IRS can get additional funds from future paychecks until all of the debt is paid off in full. The amount of money that is taken depends on how much money is owed, along with how much time it takes for the tax debt to be repaid plus interest accrued during that time period; therefore, it can be tough for people who are struggling financially to overcome these debts without help from a professional tax consultant.
Also, the IRS is required to send a Notice of Intent to Levy (NIL) to your employer once they have determined that they can collect money from you through wage garnishment. Your employer needs to start paying the money when it gets sent by the IRS. If not, then you could be sued for back taxes and penalties.
How to find out if the IRS is garnishing wages?
Here is how to identify the entity responsible for salary garnishment:
- Look for deductions labeled “Other” or “Miscellaneous” if your paycheck is much less than you anticipated.
- You should double-check with your employer to ensure they have given you a copy of the garnishment documents. If they are taking money out of your paycheck, they should provide you with a copy of the papers.
- Review all of the letters you have received from your debtors. You can stumble onto a forgotten mention of pay garnishment in the course of your investigation.
What is the limit for IRS wage garnishment?
The federal government limits how much a creditor may collect from people’s paychecks via IRS wage garnishment.
If your income exceeds the statutory minimum wage, the law requires a minimum contribution of 25% of your annual take-home pay or less. Your take-home pay is the amount of money left after deductions from your gross pay. Federal and state taxes, unemployment insurance premiums, Social Security, and mandatory retirement contributions are all necessary presumptions. No deductions for things like health or life insurance are to be made.
Can I Stop my paycheck from being garnished?
The answer is yes!
Part of your paycheck will be withheld by the IRS every time you are paid if they levy (seize) your salary until; The amount of back taxes you owe is paid in full. You can do it by making alternative arrangements to pay what you owe.
You can do this by setting up an installment plan or offer in compromise. Let’s understand both of them,
Taxpayers who are behind on their obligations may set up a payment plan with the Internal Revenue Service. As a result, you may settle your tax bill (together with accrued interests and penalties) by making installment payments over time.
Most of the time, taxpayers may get into a simplified payment plan with the IRS if their total tax, penalty, and interest debt is less than $50,000. The IRS is also considering expanding the broadened requirement to include people with tax debts of more than $50,000 but less than $100,000. Persons with tax debts of more than $100,000 will need to provide a financial statement before an installment plan may be negotiated. It’s also worth noting that expenses are associated with filing for an IRS installment arrangement. Fees for installment agreements may vary based on the taxpayer’s payment method, the nature of the arrangement, and the taxpayer’s financial situation.
Offer in compromise
This alternative lets you settle your tax debts for less than what you owe. This option may be handy if you can’t pay the tax debts. Despite being the most publicized option, it is challenging to access. The IRS grants less than half of the requests. As a result of the inaccessibility of this tax relief, it is always advisable to consider other options first.
- The IRS will consider your ability to pay, your income and expenses, and the value of your assets. Aside from that, tax debts paid are less.
The other benefits of this alternative include:
- Collection activity is brought to a halt.
- Bankruptcy is averted.
- All federal tax liens are released.
The disadvantages include: it’s not readily attainable, and you won’t be able to claim tax refunds. We suggest opting for a professional tax consultant to help you through this process.
In short; The IRS can take a portion of your paycheck if you have outstanding back taxes and owe money. This may sound confusing, but it’s easy to work through if you know what to do. The IRS will garnish your wages or take them out of your bank account. You can stop this by filing all the necessary paperwork with the court and making sure your garnishment is paid on time every month. Any missed payments result in additional penalties and fees, so you must stay current with everything related to your tax debt.