The Internal Revenue Service (IRS) has significant authority when it comes to collecting unpaid taxes, including the power to garnish wages from New York residents. This guide explains what you need to know about IRS wage garnishment, your rights, and potential solutions.
Understanding IRS Wage Garnishment
A wage garnishment, also known as a wage levy, is a legal procedure that allows the IRS to take a portion of your earnings directly from your employer to satisfy tax debt. Significantly, the IRS has the power to garnish earnings without first going through the legal system, unlike private creditors who need a court order.
Wage garnishment by various creditors is allowed in New York, but most creditors must first file a lawsuit and obtain a monetary judgment. There are also restrictions on how much can be deducted from your paycheck.
Creditors can include various entities like debt collectors, credit card companies, banks, auto lenders, government agencies, taxing authorities (such as the IRS or NYS Department of Taxation and Finance), or even personal connections like business partners or spouses. While most creditors need a court judgment to garnish wages, certain creditors are allowed to garnish without a court judgment.
When Does the IRS Garnish Wages?
The IRS only uses wage garnishment as a last resort after multiple unsuccessful attempts to collect unpaid taxes. Many taxpayers feel stressed by IRS notifications and choose to ignore them. Unfortunately, ignoring these notices makes resolving tax debt harder, though not impossible. Acting quickly gives you more options to address the issue.
Here’s an outline of the process leading up to IRS wage garnishment:
1. Tax Debt Assessment
Initially, the IRS identifies that a taxpayer owes money and sends a bill or notice to start the collection process.
2. IRS Notifications
Before garnishing wages, the IRS typically sends three to four notices. These letters outline the amount owed, penalties, interest, and potential actions if the debt remains unpaid.
3. Final Notice of Intent to Levy
The IRS must send a “Notice of Your Right to a Hearing” and a “Final Notice of Intent to Levy” at least 30 days before the start of wage garnishment. This 30-day window is an opportunity for the taxpayer to pay their debt or make alternative arrangements.
4. Failure to Address the Debt
If you fail to pay, arrange a settlement, or respond to the final notice within 30 days, the IRS can proceed with wage garnishment. At this stage, they will notify your employer directly to begin withholding wages in order to pay those funds withheld to the IRS.
5. Ongoing Garnishment
The garnishment continues until the full debt is paid off or until you negotiate an alternative solution with the IRS, such as a payment plan or an offer in compromise.
By addressing tax issues early, you can avoid wage garnishment and explore more manageable solutions.
How Much Can the IRS Take?
The IRS applies garnishment on your disposable income after the typical deductions such as income tax and retirement contributions. It also takes into account the national criteria for living expenditures, instead of just taking a basic percentage or flat rate from your salary. The IRS uses certain computations to figure out how much it can deduct from your paycheck. They take into consideration your:
- Filing status (Single, Married Filing Jointly, Married Filing Separately, or Head of Household)
- Number of dependents
- Pay frequency
- Age (whether you’re 65 or older)
- Visual impairment status.
The IRS uses a sheet called Publication 1494 to calculate the exempt amount you’re allowed to keep, taking everything above that threshold. This can result in a significant reduction in take-home pay, often much more severe than private creditor garnishments.
New York State Protections
While New York State provides additional protections for private debt garnishments, these state-level protections generally don’t apply to IRS wage garnishments.
For private debts, New York limits garnishment to the lesser of:
- 10% of gross wages, or
- 25% of disposable income.
Further, if your disposable income is less than 30 times the state or federal minimum wage, it cannot be garnished at all by private creditors.
However, federal tax levies operate under different rules and can potentially take a larger portion of your wages.
Impact on Employment
Employer Obligations
Employers must comply with IRS wage garnishment orders immediately upon getting notified. They are legally required to:
- Begin withholding the specified amount
- Forward payments to the IRS
- Continue the garnishment until notified otherwise.
Employment Protection
Your employer cannot fire you, deny you promotions, or take negative action against you solely because of a wage garnishment.
How To Stop IRS Wage Garnishment
Dealing with IRS wage garnishment can feel overwhelming, but there are options available to stop the process and regain financial control:
1. Pay the Debt in Full
The quickest way to end IRS wage garnishment is by fully paying off your tax debt. However, this option may not be feasible for everyone.
2. Establish a Payment Plan
The IRS may allow you to set up an installment agreement, enabling you to pay your tax debt over time. Once a payment plan is in place, the garnishment will stop, providing you with some financial relief.
3. Explore an Offer in Compromise
If you are unable to pay the entire tax debt, you may qualify for an Offer in Compromise. This arrangement allows you to settle your debt for less than the full amount owed, based on your financial situation. Since the IRS has strict eligibility criteria for this program, consulting a tax attorney is highly recommended.
4. Apply for Currently Non-Collectible (CNC) Status
You may be eligible for CNC status if the IRS determines that you are going through extreme financial hardship. This designation temporarily halts collection efforts, including wage garnishment, giving you time to improve your finances. Keep in mind that the IRS will periodically review your financial situation to determine whether collections should resume.
5. Consider Filing for Bankruptcy
Filing for bankruptcy may stop wage garnishment, but it’s a serious decision with significant consequences. Not all bankruptcy filings will eliminate tax debt, so it’s essential to consult a professional to understand how this option would affect your financial future.
6. Address Tax Liability Errors
If you believe the tax debt is incorrect due to an error, you can dispute it with the IRS. Correcting any inaccuracies could help stop wage garnishment altogether.
By taking proactive steps and seeking professional guidance when necessary, you can navigate the challenges of IRS wage garnishment and work toward a more stable financial future.
Working with a qualified tax attorney can help protect your rights and explore alternatives to wage garnishment. IRS solutions attorney John D’Amato has nearly 30 years of experience helping individuals resolve IRS problems with personalized attention and effective strategies.
Frequently Asked Questions
After a wage garnishment begins, is it possible to negotiate with the IRS?
Yes, even after a garnishment begins, you can still negotiate with the IRS. Working with a qualified tax attorney like John D’Amato can help you explore options such as installment agreements or an offer in compromise to potentially reduce or eliminate the garnishment.
What happens if I change jobs during a wage garnishment?
The IRS will typically locate your new employer and reinstate the wage garnishment. It’s crucial to address the underlying tax debt rather than attempting to avoid the garnishment by changing employment.
Can the IRS garnish my spouse’s wages for my tax debt?
If you filed joint returns, both you and your spouse may be liable for the tax debt. However, if the tax debt predates your marriage or stems from separate returns, your spouse’s wages generally cannot be garnished for your individual tax debt.
How soon will my pay be garnished by the IRS?
The IRS must provide at least 30 days’ notice before beginning a wage garnishment, except in special circumstances such as jeopardy assessments or federal contractor levies.
For immediate assistance with IRS wage garnishment issues in New York, contact Attorney John D’Amato at (716) 703-9099.
Protect Your Wages and Financial Future With John D’Amato
When facing IRS wage garnishment in New York, you don’t have to navigate these challenging waters alone. We at John D’Amato understand the stress and uncertainty that tax problems can create, and we’re here to help you find the best path forward.
With nearly three decades of experience helping individuals and families resolve their IRS issues, Attorney John D’Amato has successfully assisted many clients in protecting their wages and securing their finances. We take pride in providing personalized attention to each case, ensuring that you understand all your options and feel confident in the steps we take together.
Don’t let wage garnishment overwhelm you or disrupt your life. Take the first step toward financial peace of mind by reaching out to our office. We’ll listen to your situation with compassion and develop a strategic plan tailored to your specific needs.
Call (716) 703-9099 to schedule a private, cost-free consultation. Together, we can work to stop wage garnishment and help you regain control of your financial future. Remember, the sooner you act, the more options you’ll have available to resolve your tax issues.