What Is an IRS Wage Levy?

Getting letters from the IRS is scary. Getting one that says there’s going to be a wage levy can induce a panic attack.

You’re not the first person to get such a notice, and you’re not going to be the last. Employers have noted that 7.2% of employees have faced wage garnishments. About 20% of wage garnishments are related to unpaid taxes.

Read on to find out what a wage levy is, why it happens, and what you can do to stop it.

What Is a Wage Levy by the IRS?

A wage levy is also known as a wage garnishment. This is where a creditor can legally notify your employer to hold a portion of your wages to pay back debts.

A wage garnishment can be done for many reasons. You may owe money for child support, which is the most common reason. You may owe credit card debts. Another common reason is for back payment of taxes.

This could be embarrassing for you because your employer will then become aware of the problem. Once your employer receives notice that you’re supposed to have your wages garnished, there isn’t anything they can do. They must legally comply with the notice.

The Wage Levy Amount

There isn’t a legal limit as to how much the IRS can take from your earnings. Some estimates have it as high as 70%. That will leave you with very little on which to live.

The IRS uses Publication 1494 to determine how much you’re left with. The exact amount will depend on your filing status, how many dependents you have, and how often you’re paid.

For example, if you get paid $1,000 a week and file as single with no dependents, the IRS can leave you with $469.23. That can cause significant hardship if you’re depending on those funds to live. Ideally, you want to be in a position to save money rather than pay off debts.

Is It Different from a Lien?

You may get a notice from the IRS that says they’re going to either levy your bank accounts or income or place a lien on your property.

A lien places a claim against your property. In many instances, this is a home that you own.

If you’re a serial renter and don’t own property, the IRS will go ahead and place a levy on your assets. This will either come in the form of seizing your bank accounts or placing a levy on your wages to satisfy the debt.

Insight into the IRS Collections Process

The IRS doesn’t randomly assess levies on wages and bank accounts. There’s a very specific collections process the IRS uses to collect taxes owed.

Most of the collections process comes in the form of automated letters. It is important to note that there are a lot of scammers out there. These scams are designed to scare you into paying people money. Unsuspecting people pay these scammers about $23 million every year.

The IRS makes it a point to tell people that they will not call and demand money immediately. They will not demand that you pay with cash or a debit card. They also will not threaten you to show up on your doorstep with the police to collect a debt.

The process to collect a debt will begin with a bill that you’ll get if you don’t pay your taxes in full. The bill will ask for full payment, plus penalties and interest. You’ll then receive a series of letters, each one more strongly worded and with a timeline to respond.

Some of them will be sent certified mail, so you will have no excuse saying that you didn’t get the letter.

If you want to avoid a wage levy, this is the time to contact the IRS to try to get on an installment plan.

If you don’t respond to these letters or pay your debts in full, the IRS will send form LT 11, which notifies you that the IRS will seize your property or levy your wages.

At this point, you have 30 days to respond and ask for a hearing.

What Can You Do About a Wage Levy?

Getting an LT 11 form doesn’t mean it’s the end of the world. It will scare you to no end, but there are still some things you can do.

You can pay off your debts immediately. You could contact the IRS yourself and see if it’s possible to set up an installment plan.

Hire Someone to Assist You

While you can work with the IRS directly, there are some things you can do that will require the help of an expert. Additional ways to postpone the levy include filing an offer in compromise or proving economic hardship.

Both of these options require a long process to prove economic hardship and to have an offer in compromise accepted.

When you do get a wage levy and you go down this route, you’ll want to hire experts who have worked with the IRS before. Check out this site for more info.

Dealing With the IRS Doesn’t Have to Be Scary

Anytime you face financial hardship, the easiest thing to do is avoid, avoid, avoid. You want to avoid the situation and throw out letters from the IRS.

Doing so can cause the situation to escalate into a seizure of property, such as a boat or car. You can also have a wage levy, which can be embarrassing to you and leave you with little money to live on.

It’s always best to handle the situation immediately, but if you don’t, you still have options. You can always work with the IRS or have a firm handle it for you.

Would you like more great financial tips? Check out these tips to help you get out of debt.

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Melissa Thompson

Melissa is a mother of 2, lives in Utah, and writes for a multitude of sites. She is currently the EIC of HarcourtHealth.com and writes about health, wellness, and business topics.