When the IRS comes knocking, it’s rarely a pleasant experience. But when wage garnishment starts, it can be a total pain. Suddenly, your paycheck is lower, and the strain on your finances becomes real.
Fortunately, there are ways to stop this from happening. This guide will walk you through the steps to immediately stop an IRS wage garnishment to help you regain control of your paycheck and, hopefully, your overall financial picture.
Understanding IRS Wage Garnishment
Before taking action, it’s important to understand what an IRS wage garnishment is and why it happens. Essentially, wage garnishment is a legal process in which your employer withholds a portion of your earnings to pay off your tax debt. The IRS resorts to this when you’ve failed to settle your tax debt and have exhausted other collection methods.
The agency is required to send several notices to taxpayers before resorting to garnishment. However, if these warnings go unnoticed or unresolved, the IRS can legally seize part of your paycheck.
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It’s Key to Communicate
One of the biggest mistakes you can make is ignoring IRS notices and requests. Once you get wind of the agency’s intention to garnish your check, you should communicate with an IRS representative immediately.
“First, make sure the outstanding amount is valid and make sure you have filed the previous year’s tax returns and the current tax return. Sometimes, if people don’t file, the IRS will base what they owe on the income that has been reported to them, but they don’t know all of the deductions and credits they’re eligible for, so make sure you file your taxes and get all the deductions and credits you’re eligible for,” says Lisa Greene-Lewis, a tax expert and spokesperson at TurboTax.
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Settling Through Full Payment
“If you want the IRS out of your hair, the quickest way to stop the wage garnishment is to pay off your balance due in full, if possible, ” says Jessica Wheaton, a certified public accountant with Fiske & Company in Coral Springs, Florida.
While this might seem daunting, especially if you owe a lot, it’s the quickest way to remove the garnishment order. Once your debt is deleted, the IRS will stop collection actions against your wages.
Full payment may be a viable option if you have savings or assets you can be liquidated quickly. In some cases, it may be worth it to borrow from family or apply for a personal loan, which may be better than getting your wages garnished each week.
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Keep in mind that paying the debt also means interest and penalties stop accruing, potentially saving you money in the long run.
Arranging a Payment Plan
If paying the full amount isn’t an option, consider setting up a payment plan with the IRS. An installment agreement allows you to repay your debt over time while suspending the garnishment.
This option requires negotiating with the IRS, but once established, it can buy time and potentially create some margin in your budget so that you manage your finances more effectively.
To initiate a payment plan, you must contact the IRS directly or work with a tax professional who can negotiate on your behalf.
The installment terms will depend on your financial situation and ability to pay. Adhering to the agreed-upon schedule is essential, as defaulting could lead to the reactivation of garnishment.
Filing for Bankruptcy
“Taxpayers facing wage garnishment may be able to temporarily pause wage garnishment by contacting the IRS and requesting an extension or by filing bankruptcy because of the automatic stay granted thereby,” says John Accursio, an associate in Abrams Garfinkel Margolis & Bergson’s corporate and tax law practices.
Filing for bankruptcy can create an immediate halt to IRS wage garnishment through a provision known as the “automatic stay.” When you file for bankruptcy, an automatic stay goes into effect that temporarily prohibits creditors, including the IRS, from collecting your debts.
However, it’s important to note that bankruptcy is a major financial decision that can have long-lasting effects on your credit. Due to the potential effects on your financial health, consulting with a bankruptcy attorney can help determine if this is the right option for your situation.
Exploring ‘Currently Not Collectible’ Status
For taxpayers experiencing significant financial hardship, applying for “Currently Not Collectible” (CNC) status can provide temporary relief. If approved, the IRS halts collection activities, including wage garnishment, because you lack the means to pay.
To apply for CNC status, you must provide detailed financial information that proves your inability to meet basic living expenses while repaying the debt. This status isn’t permanent and requires periodic review, but it offers a potential exemption from wage garnishments.
Offers in Compromise
An Offer in Compromise (OIC) is another potential solution for taxpayers who can’t pay their full tax bill. This program allows you to settle your debt for less than the amount owed, provided you meet specific criteria.
The IRS considers factors such as your income, expenses and asset equity when evaluating an OIC. If accepted, it stops wage garnishment and finalizes your tax debt at a reduced rate. Applying for an OIC involves preparation and can be complex, so seeking assistance from a tax professional is recommended.
Appealing Garnishments
If you believe your wage garnishment is unwarranted or erroneous, you can appeal the decision. The IRS has a structured appeals process that allows you to contest the garnishment on a very specific basis.
Common reasons for appeal include incorrect tax assessments or circumstances proving undue hardship. Successfully appealing can result in the garnishment being lifted or adjusted. Working with a tax attorney or professional may increase the likelihood of a favorable outcome.
The Bottom Line
Being proactive in addressing wage garnishment is key. The sooner you act, the more control you have over the outcome, reducing stress and financial strain.
While navigating IRS procedures may feel overwhelming, the potential relief from garnishment can make the effort worthwhile for most taxpayers.
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How to Stop an IRS Wage Garnishment Immediately originally appeared on usnews.com
