Why Would the IRS Garnish Your Wages?

Wage garnishment by the Internal Revenue Service (IRS) is an enforcement measure where a portion of a taxpayer’s earnings is legally seized to satisfy an unpaid tax debt. This action is not arbitrary but rather a targeted approach the IRS employs when other collection attempts have been unsuccessful.

Reasons for IRS Wage Garnishment

The primary reason the IRS resorts to wage garnishment is an existing unpaid tax liability. This can stem from various sources, including unaddressed income taxes, self-employment taxes, or employer payroll taxes.

Another common pathway to wage garnishment involves a taxpayer’s failure to file required tax returns. If an individual does not file, the IRS may assess a tax based on available information, often through a process known as a Substitute for Return (SFR).

Ignoring consistent communications from the IRS also contributes significantly to escalating collection actions. The IRS typically sends multiple notices and demands for payment before pursuing aggressive enforcement. A lack of response or failure to arrange payment signals the need for stronger measures.

If a taxpayer previously entered into a payment agreement, such as an installment agreement or an Offer in Compromise, but subsequently failed to uphold its terms, the IRS may re-initiate collection actions. This default can lead directly to enforcement measures like wage garnishment, as the prior agreement is no longer valid.

IRS Process Leading to Garnishment

Before the IRS can garnish wages, it must adhere to a specific legal process, beginning with the formal assessment of a tax liability. Once a tax is assessed, the IRS typically sends a series of notices and demands for payment to the taxpayer. These initial communications, such as notices like CP14, CP501, and CP503, inform the taxpayer of the balance due, including any penalties and interest, and request payment.

If the tax debt remains unpaid, a crucial step in the process is the issuance of a Final Notice of Intent to Levy and Your Right to a Hearing. This notice, often identified as Letter 1058 or LT11, serves as the final warning before the IRS can seize assets, including wages. This critical communication also informs the taxpayer of their right to request a Collection Due Process (CDP) hearing.

Taxpayers typically have 30 days from the date of the Final Notice of Intent to Levy to request a CDP hearing. This hearing offers an opportunity to discuss the tax liability, propose collection alternatives, or challenge the proposed levy. The IRS is generally prohibited from taking levy action during the period while a timely requested CDP hearing and any subsequent appeals are pending.

Statutory waiting periods must be observed by the IRS after sending certain notices before a levy can be issued. This process provides ample warning and multiple chances for resolution before garnishment.

Actions to Address Wage Garnishment

When facing an IRS wage garnishment, or to prevent one, the most direct approach is to pay the outstanding tax liability in full. This includes not only the original tax amount but also any accrued penalties and interest, and immediately halts the garnishment.

If immediate full payment is not feasible, establishing an installment agreement with the IRS is a common alternative. This arrangement allows taxpayers to make monthly payments over an agreed-upon period, typically up to 72 months, to satisfy their tax debt. Eligibility generally requires being current on all tax filings and demonstrating an inability to pay the full amount immediately.

Another option is to submit an Offer in Compromise (OIC), which allows certain taxpayers to settle their tax debt for a lower amount than what is owed. The IRS considers an OIC when there is doubt as to collectibility, meaning the taxpayer cannot pay the full amount, or when payment would create economic hardship. Eligibility requires all tax returns to be filed and current estimated tax payments to be made.

For taxpayers experiencing significant financial hardship, the IRS may grant Currently Not Collectible (CNC) status. This temporary measure halts collection efforts, including wage garnishments, when a taxpayer demonstrates they cannot meet basic living expenses if forced to pay their tax debt. While under CNC status, interest and penalties may continue to accrue, and the IRS will periodically review the taxpayer’s financial situation.

Taxpayers who received a Final Notice of Intent to Levy and timely requested a Collection Due Process (CDP) hearing can utilize this process to discuss collection alternatives and potentially stop the levy. Submitting Form 12153, Request for a Collection Due Process or Equivalent Hearing, within the 30-day timeframe can pause the garnishment and allow for negotiation with an IRS Appeals Officer.