What is Wage Garnishment?
What most people do not need in today’s economic climate is having their wages garnished by the IRS. Of course, most IRS wage garnishes are due to delinquent taxes. It is a collection tactic that works because a percentage of the employee’s pay check goes straight to the IRS.
Most employers would prefer not to have to deal with the IRS at all, so very often, the employee is under the threat of being fired or is fired. Of course, this is an illegal move on the part of the employer [IRS: 18.104.22.168 (05-05-1998)]. If you can’t work, you can’t pay the IRS back taxes.
What Is Actually Levied?
By IRS definition, wages and salary includes all personal services that might be rendered in a working environment.
A levy (which is what a garnishment is) on wages or salary can create a continuous effect. Until all back taxes and penalties are paid to the IRS, all future pay checks are under the levy. Not only is the weekly salary, or wages, attached but bonuses and commissions are also garnished.
? The IRS cannot obtain a levy against money that is not completely or determinably that of the delinquent tax payer.
? If there is a bank account, only the money in the account at the time of the levy can be touched by the IRS; no future deposits are affected.
How Is the Wage Garnishment Amount Determined?
Only a portion of the taxpayer’s salary, wages or other sources of income can be levied.
The exempt amount is determined by the formula of: The standard tax deduction normally paid by the taxpayer plus the amount deductible for exemptions on an income tax return, divided by 52.
If a tax payer is paying child support, that amount is exempt from the IRS calculations for wage levy. Proof of child support is required to be shown "Under section 6334(a)(8)" of the Internal Revenue Code.
Other exemptions may be claimed under the following categories:
? Claiming the Exempt Amount 22.214.171.124.1 (05-05-1998)
? Employers with Centralized Payrolls 126.96.36.199.2 (05-05-1998)
? Joint Liabilities 188.8.131.52.3 (05-05-1998)
? Taxpayers with More Than One Source of Income 184.108.40.206.4 (05-05-1998)
? Taxpayer's Payroll Deductions 220.127.116.11.5 (05-05-1998)
? Severance Pay 18.104.22.168.6 (07-26-2002)
? Levy Payments 22.214.171.124 (07-26-2002)
How Can a Levy Be Avoided?
The IRS has in place a process called Offer in Compromise which is an agreement that allows resolution to a taxpayer’s liability. The IRS can act on its own authority to either discharge or lower tax liability for the following reasons:
? There is Doubt as to the Liability and its assessment
? It might not be possible for the taxpayer to pay the full amount, or even a part of the amount due, causing Doubt of Collectability. There are many factors involved in this process.
? When the IRS has absolutely no doubts about Collectability and Liability, the taxpayer might be discharged if, by collecting the delinquent taxes, it would cause serious hardship to the taxpayer and/or the taxpayer’s family.
Qualifying for Offer in Compromise
A Taxpayer must meet the following requirements:
1. Completion of Form 656 (OIC) and Forms 433-A and 433-B, "Collection Information Statements."
2. Application fees for both forms must be submitted
3. All Federal Tax Returns are filed
4. Employment Tax Returns must be filed and paid for on time for the two quarter periods prior to filing the OIC
5. The taxpayer is not a debtor in a bankruptcy case
The easiest way to avoid wage garnishment is to pay your taxes!