How to Negotiate a Wage Garnishment With the IRS

Published By: Chad Silver
Last Updated: November 8, 2022

See More in: Tax Law

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The Internal Revenue Service (IRS) has more power to reclaim unpaid debts than almost any other entity in the United States, and if you owe back taxes, the agency can levy your assets and garnish your wages. A wage garnishment is when the IRS tells your employer to withhold money from your paycheck and send it directly to the IRS.

Your employer must comply with the IRS’s requests, and the garnishments can put a significant dent in your take-home income. There are ways to reduce the amount of your garnishment or get it released completely, but the process can be complicated. This guide explains how you can reduce a wage garnishment from the IRS, and it looks at ways to get rid of a garnishment.

Getting rid of a garnishment, however, is never straightforward, and ideally, you should make arrangements with the IRS before it starts garnishing your wages. Here is what you need to know if the garnishment has already begun.

How to Negotiate an IRS Wage Garnishment

Most creditors can only garnish 25% of your disposable income, but these rules don’t apply to the IRS. The law only requires the agency to leave you enough money for basic living expenses, and it can take everything above that threshold. Here are three steps you can take to ensure that you pay the lowest amount possible.

File the Statement of Dependents

You have three days after you get notified of the IRS garnishment to file this statement, and you need to ensure that you complete it. This statement tells the IRS your filing status and number of dependents, and if you don’t return the document, the agency will garnish your wages as if you’re single with no dependents, leaving you just $241.35 per week.

Contact the IRS About Court-Ordered Child Support

You can also have the IRS wage garnishment reduced if you need to pay court-ordered child support. This only applies if you don’t have the child support automatically withdrawn from your paycheck, and you cannot note that child as a dependent on your statement of dependents. You can call the IRS directly to make this request.

Claim Hardship Status

The IRS may be willing to work with you if the wage garnishment is causing economic hardship. It’s important to note, however, that the IRS has stringent criteria for proving hardships. The IRS’s definition of a living wage is very low. A taxpayer who is married filing jointly with two dependents, for example, only gets to keep $648.07 per week. You’re also not exempt from wage garnishments if you’re self-employed. The IRS has the right to contact your clients and demand payments directly from them or seize the money from your bank account.

How Can You Stop an IRS Wage Garnishment

The most effective way to get a wage garnishment released is to pay the tax debt in full. Most people who are having their wages garnished, however, can’t do that; if they could, they wouldn’t be in this situation. There are, luckily, a few other options that can stop a wage garnishment.

1. Set Up an Installment Agreement

An installment agreement is when the IRS lets you make monthly payments on your tax debt. Setting up an installment agreement does not guarantee the agency will release the garnishment. It’s more likely to do so, though, if it believes you’re serious about paying off your tax debt.

2. Apply for an Offer in Compromise

An offer in compromise is when the IRS agrees to accept less than the balance owed on your account, and the agency effectively erases any remaining debt you have. The IRS garnishment generally continues while your offer is pending, but in some cases, the agency may agree to stop the garnishment once you submit your application.

3. Get Your Account Labeled as Currently-Not-Collectible

Currently-not-collectible (CNC) is a status that the IRS assigns to uncollectible accounts. You must prove to the agency that you don’t have enough income or assets to pay your tax debt. CNC status, however, is not a permanent situation. You will have to repay the debt once your financial situation improves.

4. File Bankruptcy

Bankruptcy can temporarily pause an IRS wage garnishment — the courts issue a stay to all creditors, including the IRS, when you file. A stay is basically an order to stop all collection activities, but it does not eliminate your tax debt. Bankruptcy can only eliminate tax debts that are more than three years old and were assessed more than 240 days ago, and only if you’re compliant with all your current filing obligations.

Setting up any of these arrangements on your own can be complicated, and if you’re in the midst of a garnishment, you need to be especially careful. You don’t want to agree to a payment plan, for example, and then realize the wage garnishment is still in place. A tax debt specialist can help you deal with the IRS successfully.

Mistakes to Avoid With Wage Garnishments

The IRS has the legal right to take all your pay except what you need for the bare essentials, and as you can see from the numbers above, you may not have enough money to cover your bills once a garnishment starts. Here are some mistakes to avoid if you’re worried about a wage garnishment.

Ignoring Notices

The IRS sends multiple notices before garnishing wages. Respond to these notices before a garnishment starts.

Not Appealing

Appeal the garnishment if you believe there’s an error. You typically need to start the appeal when you receive the notice of intent to levy your wages, not after the garnishment starts.

Statement of Dependents

Make sure to file this form. Every dollar helps when you’re dealing with a wage garnishment.

Dealing With the IRS on Your Own

The IRS has a complicated maze of rules and procedures, and you should always work with a professional.

The IRS wants reassurance that you’ll pay your tax debt, and the agency generally only garnishes wages as a last-stop measure. Be as proactive as possible if you have tax debt. Reaching out to the IRS first is always better than waiting for the agency to find you.

Contact Silver Tax Group to Negotiate a Wage Garnishment

An IRS wage garnishment can be a panic-inducing development, and it’s understandable if you’re unsure how to react. Silver Tax Group specializes in helping our clients deal with tax debt and prevail in IRS interactions such as negotiating a wage garnishment.

Our skilled team of tax experts has won countless concessions from the IRS for our clients, and we can help you get back in compliance. Contact our office today to speak with a tax expert about negotiating a wage garnishment.