No one plans on finding themselves in trouble with the IRS, but the truth of the matter is millions of Americans deal with debt on a yearly basis, and many of them owe back taxes to the United States government.
According to Investopedia.com, in 2009, over 8.2 million Americans owed back taxes. If you’ve landed in a precarious position with no way of paying back your debt, your first inclination may be to ignore it. However, pretending this problem doesn’t exist can have some major consequences, and one that many delinquent taxpayers run into is wage garnishment.
Imagine receiving your paycheck, then looking at the number and finding more than half of what you expected isn’t there—that’s the scary reality of wage garnishing. In order to get what they’re owed, the IRS can have your employer send a bulk of your wages directly to the government, leaving you in the lurch for your home payments, rent, or living expenses. If this has happened to you, you know just how scary it can be. Fortunately, there are ways to stop or reduce a wage garnishment.
Understand How You Got Here
If your wages have been garnished, then you likely know you’ve been ignoring the IRS for quite some time. Before enforcing any kind of tax lien, including wage garnishment, the IRS will send out numerous notices, trying to give you the chance to work out a payment plan. Eventually, they’ll send along a Final Notice of Intent to Levy. This is sent out at least 30 days before the garnishment occurs. Once you notice your wages have been seized, it’s important to talk to your employer. (Do not worry about action from your boss; you are protected under federal law against losing your job due to wage garnishment alone.) Ask your employer for a copy of the wage garnishment and use the number listed to get in contact with the IRS.
Decrease the Amount Levied
Once your wages have been levied, it’s important to come up with a way to decrease the amount garnished each paycheck while you determine how to get the levy lifted. This can be accomplished through filling out various forms, and changing the amount of dependents to reflect recent changes. The more dependents you have, the less will be seized. Keep in mind that the sooner you get in contact with the IRS, the more lenient they’re likely to be. The government agency is willing to work with those who are proactive about paying off their debt, so the sooner you get in contact with them, the better off you’ll be.
Coming Up with a Plan
According to Community Tax, there are two major tax debt payment plans under what is called the Fresh Start Initiative.
These include the Offer in Compromise program and Installment Agreements.
- Installment Agreements
If you simply can’t pay your tax debt in full immediately, you can apply for a payment plan. This installment agreement is given to taxpayers who offer to pay off their debt in smaller monthly increments. This can help release a levy and give you an actionable plan for ridding yourself of debt. If you owe more than $50,000 and can’t reasonably pay off your total debt within the next six years, it’s important to come up with a payment plan proposal.
- Offer in Compromise
In contrast, you may choose to pursue an offer in compromise. This tax settlement allows a taxpayer to pay a lesser amount. An offer in compromise can be hard to qualify for, and you must be able to prove that paying what you owe in full would cause undue financial hardship. When you file an offer in compromise, the government assesses your unpaid tax, then analyzes whether you’re ever be able to pay your debt in full. If they find that your current and forecasted income won’t handle your tax debt, they may agree to a settlement, but keep in mind that this is rare.
If your wages have been garnished, it’s vital to immediately come up with a payment plan to show the IRS you’re willing to work with them and work on getting your debt paid. Keep the above mentioned in mind and stop your wage garnishment as soon as possible.
[Editor’s note: This is partnership post.]