By Howard Abrams, PBS Tax & Bookkeeping
Q. I know people who have had their wages garnished for not paying incomes taxes. And since I have not paid my income or estimated taxes, I'm worried my wages might be garnished. When will I know if the IRS will ever garnish my earnings?
A. You will have ample warning. As long as you pay your taxes when due, you do not have to worry about garnishment.
If you do not pay your taxes, you will receive a bill from the IRS. At that point the collection process begins. If you ignore the bill and future IRS notices, your account will become delinquent and you will be closer to having your wages garnished. If you continue to ignore their letters, you may find out one day that the IRS has taken your money.
It's important to note that you can stop a garnishment if you can propose a resolution to your debt. All prior unfiled tax returns must be filed.
Q.I have ignored prior IRS collection letters. What happens if my account becomes delinquent?
A. Contact the IRS immediately. If you are receiving collection notices, you are already delinquent. Upon receiving your first IRS bill, you should make arrangements with the IRS to avoid any chance of your account ever being levied.
However, if you have ignored earlier notices and you receive a notice that says "Intention to Levy," it is crucial not to ignore that letter. The next step could be garnishment or a levy of your bank account. Note: At this point, you can stop the collection process. The IRS will help you work it out.
Q. I received a lien on my property. Does this mean they are going to garnish my wages?
A. A lien is a document to secure a payment of a debt. It is attached to property you own. It does not enable the IRS to garnish your wages. It does hurt your credit.
Q. What will the IRS do next? When will the IRS garnish (levy) my wages?
A. You will still receive letters after the lien is issued. But the IRS will garnish your wages only when you have ignored the IRS "Notice and Demand for Payment," have not paid the tax, and have allowed 30 days to pass from the IRS "Final Notice of Intent to Levy and Notice of your right to a Hearing" without responding. Therefore, call them and make arrangements.
The IRS will not garnish (levy) your wages when they are considering your request for an installment agreement or while an agreement is in effect.
Q. How do I prevent my wages from being garnished?
A. You actually have several options.
- Ask the IRS for an extension of time to pay the tax due. Generally, 120 days is the maximum time to extend. Request an extension to pay only if you can pay in full when the extended period is up.
- Request an Installment Agreement (Form 9465).
- Apply for an Offer in Compromise (Form 433 Financial Statement).
- Delay the collection action if the garnishment will create a hardship. Apply for the delay by filing form 911 "Application for Taxpayer Assistance Order."
- Have your account moved to uncollectible.
You, the taxpayer, have collection appeal rights. You can request a hearing under collection due process upon receiving a notice of federal tax lien, before the first garnishment (levy) and after garnishment when collection is in jeopardy (a hardship). If you want a collection due process hearing, make the request on Form 12153.
You can appeal a lien, levy (including after it is in place) or seizure action by requesting a collection due process. This is done by calling the IRS. If you have been contacted by a revenue officer, file Form 9423 Collection Appeal Request. You can also appeal a rejection or termination of an installment agreement.
IRS Publication 1494 will help you figure the amount of dollars that should be exempt from your garnishment as necessary living expenses. That may help you get the garnished amount lowered.LL
This article is written by PBS Tax & Bookkeeping Service, a company that has been providing income tax and bookkeeping services to the trucking industry for more than a quarter-century. If you would like further information, please contact PBS at 800-697-5153 or visit their website at pbstax.com.
Please remember everyone's financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.