Whether we like it or not, just about every U.S. citizen and resident will have some relationship with the IRS. For many, their interaction with dear Uncle Sam will be one of admiration from afar, perhaps exchanging a couple of forms or letters during the year, and if we are lucky, we may even receive a check or two. For others, their relationship with the IRS can resemble a visit from your larger-than-life, cigar-smoking, raucous cousin Eddie at Christmas time, whose visit extends until Flag Day. So, if you are buckling under the weight of an IRS wage garnishment that has outstayed its welcome, it is time to get yourself free! You don’t need to slip out the back door of your employer’s HR office, thinking there is nothing that can be done. We have seven practical ways to relieve your pocketbook from an IRS wage garnishment.
While this blog focuses on ways you can stop a wage garnishment, you may have questions about wage garnishment basics or how the amount of the wage garnishment is calculated. For more information about the basics of a wage garnishment, check out the following blog, “Can the IRS garnish your wages? Can they garnish your entire paycheck?” If you have a hankering to understand how a wage garnishment is calculated, our blog titled “How is wage garnishment for back taxes calculated?” is for you.
Like using a sledgehammer to drive a pesky fly out of the house, the IRS uses wage garnishments to get the taxpayer’s attention about their delinquent taxes. The IRS will often issue an intent to levy because a taxpayer has not responded to previous IRS notices, not provided requested information, or has defaulted on an agreed-upon payment request. A wage garnishment is a continuous levy on a calculated amount of the taxpayer’s wages that will impact every paycheck until it is released. Here are seven ways to release an IRS wage garnishment and regain your financial freedom.
(1) Statute of Limitations has Expired
Generally, the IRS has ten years to collect any assessed tax due. The ten-year period starts the date the tax is assessed. The date of assessment is not the date the return is filed, but rather the date an IRS assessment officer enters the tax due in the taxpayer’s record. You can determine the date of assessment by calling the IRS or requesting a Tax Account Transcript or Record of Account Transcript report from the IRS. If your tax debt feels like it’s been around longer than Methuselah, it may be worth finding out if the statute of limitations on its collection has already expired. Typically, once the statute of limitations has expired on a federal tax debt, the IRS may no longer continue collection actions. There are some rare exceptions where the IRS may continue to collect on a tax debt after the statute of limitations has expired, but 2020 has been rough enough. Let’s put a pin in that discussion and save it for another year.
(2) Pay the Balance Due
Sometimes people get too busy with life and forget to pay the balance due on their return. Others may move, not forward their new address to the IRS, and are blissfully ignorant of the unpaid balance due they have on their taxes. And then there are some other folks who think their spouse took care of the payment. Whatever the circumstance was that brought them to this point, they can pay the balance due. If you are one of these fortunate folks, there are several ways to pay the late balance due. The IRS accepts:
- Cash
- Check or money order (Payments should always be made out to the “U.S. Treasury.”)
- Same-day wire payments made from U.S. or foreign financial institutions to the IRS Credit or debit card through a third-party payment processor: There is a fee that ranges from 1.87% to 1.99% of the payment amount, depending on which payment processor is used. The IRS also limits the number of credit card payments a taxpayer may make. The limitation depends on the type of tax payment.
- Direct debit from your checking or savings account to the IRS through IRS Direct Pay
- Pay through the IRS2GO App: Through the IRS2GO app, taxpayers may make IRS Direct Pay payments and payments using their credit or debit card.
(3) Enter into an Installment Agreement
Installment agreements are the most popular method people use when they cannot pay their tax debt in full. The IRS offers a variety of installment agreements from a thirty-six month (three-year) plan up to an eighty-four month (seven-year) plan. For more information about installment agreements, please take a look at our
Installment Agreement page.
(4) Request an Offer in Compromise
An
offer in compromise allows a taxpayer to resolve their outstanding tax debt for an amount that is less than what is owed. Anyone who has watched late-night TV has probably seen an ad or two about this program. What these ads do not tell you is that not everyone who requests an offer in compromise will be approved. In fact, the IRS approves only around 40% of Offers in Compromise applications that are submitted. Filing an Offer in Compromise can be a long and complicated process. But, for the right person, it can be life-changing.
(5) Request Currently Not Collectible (CNC) Status
Sometimes a taxpayer finds themselves in dire financial straits and cannot make any payments on their tax due without seriously impacting their ability to pay for necessary living expenses such as rent, utilities, food, and necessary medical. In these situations, the IRS will place a taxpayer’s account in currently not collectible status. When an account is in
currently not collectible status, the IRS will not continue to enforce collection through the levy of a taxpayer’s bank account, wage garnishments, or other asset seizures. If you own a home, the IRS may place a lien on the property but will not seize the home. While an account is in currently not collectible status, penalties and interest will continue to accrue. Still, the statute of limitations on collecting the debt will not be suspended, meaning the time on the statute of limitations will continue to count down.
(6) Military Service Members Offering Direct Support in a Designated Combat Zone, Contingency Operation Designated by the Department of Defense, or a Qualified Hazardous Duty Area Defined by Congress
Generally, the IRS is prohibited from issuing a levy on a service member who is currently serving in a designated combat zone, contingency operation designated by the Department of Defense, or a qualified hazardous duty area defined by Congress. The IRS may not issue or enforce a levy during this time, including one- hundred-eighty days after the last day of serving in these areas. This rule not only applies to the service member, but their spouse as well.
(7) Request an Audit Reconsideration
When a taxpayer does not file their income tax return or ignores an audit notice proposing additional tax due from a previously filed tax return, the IRS will step in and make tax assessments on behalf of the taxpayer. The return will be prepared based on the information the IRS received from third parties such as Form W-2 from an employer, or Form 1099-MISC. for work an independent contractor completed, etc. The IRS prepares what is called a
Substitute for Return or
SFR. Once the IRS assesses the tax, the statute of limitations on collections begins, which triggers collection enforcement actions like levies. When a taxpayer finds themselves in this situation, they can go ahead and file the return through an
Audit Reconsideration process. Often the return that the IRS prepares has a larger tax liability than a return the taxpayer files. This is because the IRS does not consider dependents, itemized deductions, several credits, and advantageous filing statuses when they prepare a substitute for return. Our website has more information on
audit reconsiderations, including who qualifies.
Some people may resign themselves to a wage garnishment and try not to remove it. This may be a good avenue for those who are forgetful about making timely payments, whose checking account balance is unpredictable, or whose paycheck flies out of their hands faster than a cheetah who has just spotted dinner on the savannah’s horizon. But, if you qualify for one of the seven ways to stop the IRS from garnishing your paycheck, it is worth the time it takes to investigate these avenues. If you are in the midst of an IRS wage garnishment and unsure if any of the methods above are right for you,
help is just a click away. Our experts at TaxAudit’s Tax Debt Relief Assistance have years of expertise and a passion for helping taxpayers get back on their financial feet. Please
contact us today for a free consultation, where we will answer your initial questions and determine if we can help based on your specific tax situation.