When you fail to pay your taxes, the IRS has many ways to collect the money from you. One of the weapons of mass collection in the IRS arsenal is a wage garnishment. So what is wage levy? A levy is a seizure of any asset (such as your wages) to satisfy a tax debt. But levies are not imposed without warning. The IRS must put in place certain measures first before levying your wages. Three things must tale place first:
• The IRS sends a Notice and Demand for Payment
• You fail to pay the tax
• The IRS sends you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice). Only after 30 days after the final notice is sent will the IRS impose the levy. The final may be delivered in person, left at your home or usual place of work/business, or sent to your last known address by certified or registered mail, return receipt requested. If a levy is imposed on your state tax refund, you may receive a Notice of Levy on Your State Tax Refund, Notice of Your Right to Hearing after the levy.
Levying your wages means the IRS orders your employer to withhold a certain portion of your wages to pay for your outstanding tax debt. This also includes self-employment income, your pension or Social Security income. The amount of the levy depends on your Filing Status and family size and such an action by the Internal Revenue does not require a court order.
Once the IRS has levied your wages, what can you do to remove it?
The first thing to do is contact the IRS to request a repayment plan. Do not wait until you are able to pay your tax debt in full before contacting the IRS. Work out a payment plan and the IRS will discuss the various payment options with you.
When contacted, the IRS will want to find out your ability to repay (i.e. how much you can afford). Appeal the levy according to the instructions found in the levy notice. For instance, for an IRS wage levy appeal, request a collection due process hearing with the appeals office stated on your levy notice within 30 days of the levy notice date. You must provide proof to support your appeal if you object to the levy amount.
If you agree with the levy, you can either pay your tax debt in a lump-sum payment or let the wage deduction continue until you clear your debt. IRS interest for late or non-payment is very high so consider borrowing funds from a 401, an IRA distribution, equity in your home, or even a credit card.