One of the primary functions of the IRS is to collect all federal income taxes. Congress has given the IRS a tremendous amount of authority and power to allow it to fulfill this function. Given these powers and the number of resources available to it, the IRS is one of the largest, most aggressive and successful collection agencies in the world. One of the most extraordinary powers the IRS has available is the ability to garnish the wages of taxpayers with past-due liabilities.
There are only a few requirements that must be met before the IRS can levy a taxpayer’s wages:
1. The IRS must have assessed the tax and sent a Notice and Demand for Payment;
2. The taxpayer must have neglected or refused to pay the tax; and,
3. The IRS must have sent a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy.
The IRS can serve the Final Notice in person, leave it at the taxpayer’s home or usual place of business, or send it to the last known address by certified or registered mail. It is important to note that the IRS is only required to send the Final Notice to the last address known to it. The taxpayer does not need to actually receive the notice for it to be effective. Many taxpayers never actually receive the final notice. Those taxpayers may not realize they are in danger of receiving a levy until their wages are actually garnished.
Once an employer receives a Notice of Levy from the IRS, they are required to immediately withhold a large portion of the taxpayer’s wages and send the funds directly to the IRS. The amount of funds that must be withheld is determined by how often the taxpayer is paid and their number of dependents. However, an IRS garnishment usually takes a much larger percentage of funds then other levies.
Once a wage garnishment is issued, it is important to act quickly to get it released. Normally, the taxpayer will need to provide the IRS with detailed financial information and enter into negotiations regarding a resolution of the delinquent taxes before the garnishment will be released. Any such resolution will be based on the taxpayer’s unique, specific financial situation. Because of the technicalities and complexities of these negotiations, you should speak with a tax professional for assistance.