IRS wage garnishments and a bank levy are often confused—and for good reason. Both are actions taken by the IRS when a taxpayer fails to pay their taxes on time or in the right amount. But beyond that, the two are actually quite different.
IRS Wage Garnishment
A wage garnishment occurs when the IRS takes money out of your paycheck before it gets deposited into your account. The IRS will contact your employer, and your employer is required to comply with them and give them the money they request. This is not a single action. The IRS will continue to take money out of your paychecks until the debt is paid off or a tax attorney steps in to stop the collections.
To stop wage garnishments, you can work with a tax professional to request an offer in compromise or an installment agreement. An offer in compromise convinces the IRS to accept less than what you owe, while an installment agreement allows you to pay off your debt in increments over a 3-year period.
Taxpayers will receive a “final” notice before wage garnishments happen. Once this notice is received, you will have 30 days to find another solution before money is taken out of your checks.
A bank levy is what most people think when they hear someone is being penalized by the IRS for unpaid taxes. It is the legal seizure of your assets by the IRS for interest and penalties. When you have a bank levy, the IRS will freeze your account and take the money you owe. If the money is not there, they can also take from your assets. This is usually a one-time occurrence, although the bank levy will remain in place until your tax debt is paid in full.
Similar to a wage garnishment, the IRS will work with a taxpayer to avoid their assets being taken. If you are uncooperative or simply ignoring the IRS, you are at risk for this to happen. But, if you are working with a tax attorney, responding to the IRS and trying to work out your debt, you are less likely to have a bank levy placed against you.
If you have received one of these notices or fear you may soon, contact the experienced tax professionals at Levy, Tax & Associates. Contact us at 1-800-TAX-LEVY or visit our website to learn more.