How To Stop IRS Wage Garnishment

If you’re subject to a tax levy, one of the assets that the IRS will target is your wages. A wage levy is when the IRS garnishes your paycheck to cover back taxes, interest, and penalties.

The IRS prefers to levy liquid financial assets (like your paycheck or bank account) rather than real property because there’s a faster timeline for payment.

If the IRS garnishes your wages you will be left with just enough to cover basic necessities. This works in theory but not in practice. The IRS can garnish more than typical creditors, leaving some taxpayers with barely over $1,000 a month until the debt is fully paid. Fortunately, there are ways to stop the wage garnishment and achieve tax resolution.

Sacramento tax attorney Jin Kim helps taxpayers stop wage garnishment, IRS levies, and other collection actions. Call her office at (916) 299-9913 to learn more about your tax resolution options.

How Much Money Can I Protect From IRS Wage Garnishment?

The IRS can’t take your entire paycheck, but they can take a significant portion. IRS Publication 1494 details the amount that can be protected from IRS wage garnishment. The amount varies based on the filing status of the taxpayer and the number of dependents. For instance, as of 2024, a single taxpayer with 3 dependents can exempt (ie. protect) $569.22 weekly from IRS wage garnishment. Likewise, a married filing jointly taxpayer with 3 dependents can protect $849.99 weekly.

The takeaway from IRS Publication 1494 is that the IRS can take a significant portion of your paycheck. In reality, a single taxpayer with 3 kids cannot live off the exempt amount of $569.22 per week. Accordingly, taxpayers subject to IRS wage levy quickly fall behind on other bills as they try to make ends meet.

The 7 Ways To Stop IRS Wage Garnishment

Stopping IRS wage garnishment is a critical step in tax resolution. Here are 7 ways a taxpayer can stop IRS wage garnishment to preserve their financial integrity.

1. Pay the Tax Debt in Full

The quickest way to stop IRS wage garnishment is to pay the total tax debt, including any penalties and interest. Once the debt is paid, the IRS will release the garnishment. This solution is viable if the tax debt is minimal and the taxpayer has funds available to pay the amount owed.

2. Enter into an Installment Agreement

Taxpayers can negotiate an installment agreement with the IRS to pay their tax debt over time. Once an installment agreement is in place, the IRS will typically stop wage garnishment. Taxpayers can apply for an installment agreement using IRS Form 9465.

3. Submit an Offer in Compromise

An Offer in Compromise (OIC) allows taxpayers to settle their tax debt for less than the full amount owed. If the IRS accepts the offer, wage garnishment will cease. The process involves submitting IRS Form 656 and providing detailed financial information using IRS Form 433-A (OIC) or 433-B (OIC).

4. Prove Financial Hardship

If wage garnishment is causing significant financial hardship, taxpayers can request the IRS to classify their account as “currently not collectible” due to financial hardship. This status temporarily suspends collection efforts, including wage garnishment. Taxpayers will need to provide detailed financial information using IRS Form 433-A or 433-F.

5. File for Bankruptcy

In some cases, filing for bankruptcy can stop IRS wage garnishment. Filing for Chapter 7 or Chapter 13 bankruptcy creates an automatic stay, which temporarily halts most collection activities, including wage garnishment. However, not all tax debt can be eliminated in bankruptcy. Generally, sales tax debt, recent income tax debt, and income tax debt for tax years in which no return was filed cannot be eliminated in bankruptcy. Accordingly, filing for bankruptcy to eliminate tax debt is a serious decision with long-term financial implications and should be navigated with the assistance of a bankruptcy attorney.

6. Correct Any Errors

If the wage garnishment is based on incorrect information or if you do not actually owe the amount the IRS claims, you should contact the IRS immediately to resolve the discrepancy. Providing documentation to support your case can help correct the error and stop the garnishment.

7. Consult a Tax Attorney

Seeking assistance from a tax professional, such as a CPA, enrolled agent, or tax attorney, can provide valuable guidance and support. A tax professional can help negotiate with the IRS, explore all available options, and ensure that all necessary paperwork is completed correctly.