The IRS uses its wage levy power as a means of legally collecting individual tax debts.
Sometimes called an IRS wage garnishment or attachment, a levy compels your employer to withhold some portion of your wages and remit them to the Internal Revenue Service.
If the IRS attaches your wages, you may need legal assistance to give you specific answers to your questions and to help resolve the issue.
No. 1: When Will the IRS Pursue a Wage Levy?
When you have an tax debt, the IRS will send a first and second bill, detailing the amount you owe as well as any interest and penalties. They do this through the mail, using the last address they have on file for you. If you fail to respond, they elevate their attempts to collect your debt.
You will then be sent a notification that the IRS intends to pursue the debt legally. If you ignore this notification, they will send out a second notification, the final notice of intent to levy. Thirty days later, if you have not contacted them or attempted to pay the debt, the wage levy will begin.
NOTE: In some cases, the IRS may attempt to contact you by phone. However, because many scammers call claiming to be collecting tax debts for the government, be extremely careful. Contact a tax lawyer to assist you in your dealings with the IRS to help avoid these scams.
No. 2: Is a Wage Levy the Same as a Garnishment or Lien?
Although these terms are sometimes used interchangeably, the process used by the IRS is known officially as a wage levy.
A levy is the legal seizure of assets to satisfy a tax debt. A lien constitutes a legal claim against assets, but it is not sufficient on its own for seizure. Typically, garnishments refer to the seizure of wages, and levies refer to the seizure of funds from a bank account. However, since the IRS uses “wage levy,” this is also the term most tax attorneys use.
No. 3: How Does the IRS Get a Wage Levy?
When you have a debt to an ordinary creditor, they must go to court and obtain a judgment before they can attach your wages. The IRS does not have to obtain a judgment, however, to levy your pay.
The process begins when the IRS sends your employer notification of the levy. It is up to your employer to turn over information, advising the IRS of how much they will withhold from each pay period. The levy remains in place until the IRS notifies your employer that the levy has been released and they no long need to withhold your salary.
No. 4: How Much of Your Pay Can an IRS Levy Take?
The portion of your wages that the IRS can seize depends on how many personal exemptions you are allowed and the standard deduction that applies to your filing status. It is not unusual for the IRS to take as much as 70 percent of your wages.
Along with notification of the levy, your employer will receive Publication 1494 from the IRS, which they must complete. Your employer will provide you with a form called the Statement of Exemptions and Filing Status, which will help determine the amount of your withholding. You have three days to complete and return it to your employer. If you fail to return the form, your levy will be calculated based on the “married filing separately” status and one personal exemption.
In addition to your standard pay, the levy can attach any bonuses, commissions and fees that you receive until the debt is satisfied.
No. 5: What Should You Do if You Get an IRS Wage Levy?
It’s always best to get in front of any IRS debt or dispute, so that you can — whenever possible — avoid levies and liens. But if you do find your wages levied, contact a tax attorney as soon as possible.
An experienced tax lawyer can help restore open communication with the IRS and work out an agreement to help resolve the levy.
In Salt Lake City, the Froisland Law Firm provides personalized assistance with outstanding tax debts, penalties, liens and offers in compromise. Contact me today to learn more about how I can help with your IRS wage levy.