What is an IRS Wage Garnishment?
While it is possible to stop wage garnishments, lets first learn a little about what it is.
An IRS wage garnishment is a legal procedure whereby a portion of an individual’s wages are withheld by their employer to satisfy unpaid taxes. This measure is taken when the taxpayer fails to pay delinquent taxes voluntarily, and the Internal Revenue Service (IRS) or state tax authority has determined that it has exhausted all other collection options.
A garnishment order is put in place and the employer withholds a predetermined amount of money from the employee’s paycheck each pay period and sends it directly to the IRS or state tax authority.
Depending on the amount owed, the wage garnishment can last until either the full amount is paid off or another form of payment arrangement is made with the taxing authority.
It’s important for taxpayers to understand that wage garnishments may leave them unable to meet their regular financial obligations and should be avoided at all costs.
Depending on your financial situation, you may be able to avoid or stop wage garnishment all together. We highly recommend contacting a tax professional to discuss your situation and provide the best option available.
How Does a Wage Garnishment Happen?
A wage garnishment occurs when a creditor or government agency successfully obtains a wage garnishment order through a court to collect unpaid debts from an individual’s paycheck.
The court order requires the employer of the debtor to withhold a certain amount of money from each paycheck and forward it directly to the creditor or agency in question.
Depending on the state, wages can be garnished up to 25% of disposable earnings. In some cases, such as child support, alimony, or taxes, wages can be garnished without a court order.
In either case, the employer is legally obligated to comply with the garnishment until all obligations have been met and all debt has been paid off.
How Much of Your Wages Can Be Garnished By The IRS?
The IRS is able to garnish a portion of your wages if you owe back taxes. The amount they can take depends on several factors, including the amount you owe, your filing status, and other deductions that may be taken out of your paycheck.
Generally, up to 25% of disposable income (what’s left after taxes and other deductions) can be taken by the IRS. This can cause financial hardship for those who owe large amounts of money or do not have a regular income.
If the garnishment is causing serious problems, it may be possible to negotiate an alternative payment plan with the IRS. Additionally, there are certain types of income that are exempt from garnishment such as Social Security benefits and disability payments.
Knowing your rights and understanding how much of your wages can be garnished by the IRS can help you avoid financial difficulty if you owe a tax debt.
Does A Wage Garnishment Affect Your Credit Score?
In most cases, wage garnishment does not directly affect your credit score as it is not listed on your credit report.
However, it can have an indirect effect because it could indicate to creditors that you are having difficulty paying your bills on time, which could lead to your credit score being lowered.
Additionally, wage garnishment can also reduce your overall income, making it more difficult to make payments on time for existing debts and potentially leading to late payments or defaults.
How to Stop Wage Garnishments?
There are a few options to stop wage garnishments, you must first contact the creditor who placed the garnishment. You can then negotiate with them to come up with an alternative repayment plan such as a one-time lump sum payment or a payment plan that works for both parties.
Depending on your credit score and income, you may be able to take out a personal loan to pay off the debt.
If the negotiation is unsuccessful, you may have to file for bankruptcy if your debt is too large to pay off in full.
Once you are in bankruptcy, the court will order all creditors to stop collecting on their debts and any garnishments will be stopped. Additionally, filing for bankruptcy will also put an automatic stay in place which will prevent any future attempts at wage garnishment or other collection activity.
We recommend contacting a tax professional to go over your situation and determine the best approach to stop the garnishment process. If the tax professional is unable to help, they will refer you to a bankruptcy attorney to move forward with the proceedings.
Does Filing Bankruptcy Stop IRS Wage Garnishments?
Filing bankruptcy can stop an IRS wage garnishment. However bankruptcy is a last resort as it will damage your credit and stays on your record for up to 10 years. There are other ways to stop a garnishment that won’t have a negative impact on your credit rating.
Bankruptcy is a legal process that can help people get out of debt and protect their assets. It can also stop garnishments and other collection attempts by the IRS.
When you file for bankruptcy, the court sends a notice to the IRS that halts any wage garnishments they may have been trying to impose on you. This allows you to keep more of your income and gives you a chance to negotiate with the IRS to make payments easier.
Additionally, filing for bankruptcy will discharge most debts, including tax debts, so you don’t have to worry about paying them back. However, it is important to remember that filing for bankruptcy does not eliminate all tax debts.
Therefore, it is important to speak with a qualified tax specialist before making any decisions about your financial future.
Income Types That Are Exempt From Garnishments
There are a number of other exemptions that can stop garnishments from taking place. Generally, these include Social Security and disability payments, public assistance benefits such as Temporary Assistance for Needy Families (TANF) and Supplemental Nutrition Assistance Program (SNAP), workers’ compensation benefits, pensions, annuities, life insurance proceeds, and some veterans’ benefits.
Other types of income may also be exempt under state laws. In addition to this, some states have additional exemptions like the head of household exemption which provides protection for certain individuals who provide financial support to dependents.
It is important to be aware of all the possible exemptions in your state in order to determine whether or not they apply to you and if they can stop garnishments from taking place.
Why Should I Hire A Tax Professional To Help With Wage Garnishments?
Hiring a tax professional to help with wage garnishments is a wise decision for anyone dealing with this intimidating and complicated process.
Tax professionals are knowledgeable about the various laws and regulations related to wage garnishment and can provide valuable advice on how to best manage the situation.
They also have experience in negotiating with creditors and can help you get the best possible outcome for your financial circumstances. Furthermore, a tax professional can explain all of your rights under the law and make sure you are in compliance with both state and federal laws. With their help, you can rest assured that your wages will be properly handled, allowing you to focus on more important matters.
National Tax Network specializes in these types of cases and we may be able to stop the debt collection process. Give us a call today at 877-860-3731 for a free 15 minute consultation and see if we can help.