Discovering a tax levy on your paycheck may feel stressful or overwhelming. Also known as a wage garnishment, a levy permits the IRS to take money directly from your paycheck to pay back any tax debt you owe.
Levies typically are not a surprise. The IRS likely sent you several communications beforehand about your debt and options for paying it. Still, seeing that this debt has led to wage garnishments can be disheartening.
Learn why you have a tax levy on your paycheck and how to proceed.
The IRS administers levies to satisfy tax debt. They typically indicate one of the following:
Before it starts garnishing your wages, the IRS follows several steps over the course of weeks or months:
If you fail to respond to the final notice, the IRS will have the right to place a wage garnishment on your income after the 30-day waiting period. In some cases, the organization may start by issuing a tax lien, which is a legal claim against your property.
Finding a levy on your paycheck means you owe a significant amount of debt or back taxes, and the IRS has made multiple attempts to demand payment from you without success. You typically do not need to do anything to fulfill a levy. Instead, your employer is responsible for sending the required portions of your paycheck directly to the IRS collections office.
The IRS does not have the right to seize your entire paycheck as part of a wage garnishment. The amount it takes per payday depends on several factors:
Generally, it will only take 25% to 50% of your disposable income, which is the amount left after taxes, Social Security, and other legally required deductions. If you receive any bonus income during the period of the federal levy, the IRS may have the right to garnish 100% of it.
The wage garnishment will continue until you make other arrangements to satisfy your debt or the IRS has taken sufficient funds from your income.
If you cannot pay your debt in full, you may be able to claim financial hardship with the IRS to reduce the amount it takes from your paychecks. You may also qualify for resolution strategies, such as setting up a payment plan and paying your debt over time.
You have the right to appeal a levy. You would need to dispute the validity of the indicated debt or request specific income to be exempt from the garnishment, such as veteran benefits.
Now that you know why there is a tax levy on your paycheck, you can start taking steps to resolve it. Our tax professionals and attorneys at Levy & Associates will explore your options for tax resolution with you and help you satisfy IRS debt. Contact us today at 877-620-6490 or fill out our online form to request a consultation.
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.