Wage garnishment is a way for the Internal Revenue Service to collect the taxes you owe directly by deducting money from your paycheck before your employer pays you. Your wages would be garnished only when you are having problems paying your debt. If there is a judgment against you, your employer is required to garnish your paycheck to pay whoever the creditor may be. Wage garnishment can create financially stressful situations because it could become quite a struggle to pay essential living expenses.
You could lose a lot more than you might have imagined. Under federal law, creditors may garnish up to 25 percent of your wages that remain after federal tax deductions are made. However, there are exceptions to who could be subject to wage garnishment. For example, those who earn very low wages are not subject to wage garnishment. These types of exemptions are in place to prevent debtors from being pushed into poverty.
Getting notice of wage garnishment can be extremely frightening and stressful. You may lose valuable income that goes toward daily expenses to support your family’s needs. This could prove financially devastating for individuals and families.
There are a few steps you can take to prevent or stop your wages from being garnished. The options that are available to you depend on your personal financial situation. The first option is to negotiate with the creditor.
In tax debt cases, you would need to negotiate with the IRS. Your wages won’t be garnished if you negotiate a payment plan or offer-in-compromise before a judgment is entered against you.
A payment plan with the IRS works like any other deal that you might work out with a creditor such as a bank or credit card company. A settlement plan will typically involve paying off your IRS debt with set monthly payments over a period of time. It is important to remember that, if at any point, you stop making these payments, the wage garnishment could begin again.
An Offer in Compromise is a program put in place by the IRS to assist taxpayers who are unable to pay what they owe or for those for whom paying the taxes they owe might create a financial hardship. An Offer in Compromise essentially allows taxpayers to settle their tax bill for a fraction of what they owe to the IRS. While this might seem like an attractive option, there are several conditions to be satisfied. The IRS will examine why your circumstances are unique. They will look into your income, your ability to pay off the debt, your expenses and any assets you may have.
In some cases, if you can prove that the money garnished from your paycheck is necessary for life’s essentials, your wages may not be garnished. You can also fight for the judgment to be vacated or set aside. You can do so by filing a motion to vacate or set aside the judgment. In some extreme cases, you may have to quit your job so your wages won’t be garnished. However, this is only a short-term fix.
If you are facing wage garnishment, it is crucial that you get the help of a seasoned tax professional who can help negotiate a settlement with the IRS and stop wage garnishment by fighting a judgment or by seeking bankruptcy protection. When you file Chapter 7 bankruptcy, an automatic stay will stop wage garnishment. In some cases, bankruptcy might be the best option for your situation. But each case must be dealt with on an individual basis and it might be in your best interest to sit down with a tax professional and determine what will work best for you.