How Much Can the IRS Levy From Your Paycheck?
Discover how the IRS calculates the portion of your paycheck it can take through a wage levy, detailing exempt amounts and protected income.
An Internal Revenue Service (IRS) wage levy represents a direct action taken by the federal government to collect unpaid tax debts. It enables the IRS to legally seize a portion of a taxpayer’s earnings directly from their employer. This measure is typically employed after a taxpayer has failed to resolve their tax obligations through other means. The purpose of this article is to clarify the specific mechanisms and limitations that determine how much of an individual’s paycheck the IRS can levy.
Understanding IRS Wage Levies
An IRS wage levy is a legal seizure of a portion of an individual’s wages, salary, or other income to satisfy a delinquent tax debt. This differs from a tax lien, which merely establishes the government’s legal claim against a taxpayer’s property to secure a debt. While a lien serves as a public notice of indebtedness, a levy actively takes the property to fulfill the tax obligation. Wage levies are considered continuous, meaning they remain in effect for subsequent pay periods until the tax debt is fully paid or the levy is released.
The IRS’s authority to issue levies stems from Internal Revenue Code Section 6331, which grants the agency the power to seize property to collect delinquent taxes. Before a wage levy is issued, the IRS must follow a specific notification process. This includes sending a “Notice and Demand for Payment” (a tax bill) and, if the debt remains unpaid, a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” This final notice must be sent at least 30 days before the levy takes effect, providing the taxpayer an opportunity to respond or request a Collection Due Process hearing.
Calculating the Exempt Amount from Wages
The IRS cannot levy an individual’s entire paycheck; a portion is legally exempt from seizure to ensure taxpayers can meet basic living expenses. This exempt amount is calculated based on the taxpayer’s filing status and the number of dependents they claim. The IRS provides specific instructions for this calculation in Publication 1494, titled “Table for Figuring Amount Exempt from Wage Levy,” which is sent to the employer along with the levy notice.
Upon receiving Form 668-W, “Notice of Levy on Wages, Salary, and Other Income,” from the IRS, the employer must provide the taxpayer with a “Statement of Dependents and Filing Status.” The taxpayer must complete and return this statement to their employer within three business days. This form provides the employer with the necessary information—filing status and number of dependents—to determine the correct exempt amount using Publication 1494. If the taxpayer fails to return the statement promptly, the exempt amount may be calculated as if they are married filing separately with no dependents, which results in a lower exempt amount.
The exempt amount is calculated for each pay period (e.g., weekly, bi-weekly, monthly) based on the figures in Publication 1494. These tables reflect changes in tax law, such as the elimination of personal exemptions, meaning the exempt amounts are now primarily based on dependents rather than personal exemptions. For instance, a single taxpayer claiming three dependents will have a specific amount exempt per pay period, which is higher than a single taxpayer with no dependents.
Types of Income Not Subject to Levy
Beyond the general exempt amount calculated for wages, certain categories of income are entirely protected from IRS levies by federal law, regardless of the taxpayer’s filing status or number of dependents. These statutory exemptions ensure that individuals receiving certain benefits retain funds deemed necessary for their welfare. This protection is distinct from the calculation involving Publication 1494.
Examples of income exempt from IRS levy include public assistance payments, such as Supplemental Security Income (SSI). Workers’ compensation benefits are also exempt from seizure. Unemployment benefits are exempt from levy.
Other protected income sources include disability benefits. Military service-connected disability payments are exempt. Pension and annuity payments, such as benefits under the Railroad Retirement Act, are exempt from levy. Court-ordered child support payments are also protected from levy.