Lorman offers professional resources regarding COVID-19 and remote working best practices.  Learn more.
Show navigation

Waiting For a Tax Garnishment - Ouch That Hurts!

» Articles » Accounting Articles » Article

July 06, 2009

One of the worst things that can happen if you are a tax debtor is an IRS garnishment or tax levy. Tax debtors can go for years before IRS collection activities finally catch up to them. It seems the sluggish bureaucracy lulls one into a false sense of security. While the delay from tax due to tax levy may be sluggish, the action of a tax garnishment is not. In fact, it may be the harshest financial event you ever experience and should be avoided if at all possible.

We all know eventually the IRS will track you and your money down. The garnishment process does not require a court order or even a hearing. The "Notice of Levy" is mailed to your employer from IRS computers or, if you owe over $25,000, an IRS collections agent. This process makes the IRS judge, jury and executioner, while placing you at the wrong end of the hangman's noose. In the past, the levy notice had a waiting period. This gave you time to make arrangements with the IRS and stop the seizure before it started. Those niceties are now gone as is your next paycheck.

Maybe you're left with a couple of hundred dollars weekly until the entire tax debt is paid off, including penalties and interest. Most people are financially devastated. Depending on how much you make and how large your tax debt is, you could go for years without a paycheck. Although the longest most people can take the punishment is a few months. At that point, most will quit their job and seek employment elsewhere, thinking that will help.

Recent laws call for employers to notify the IRS of new hires within 2 days of the start date. I've seen people go through four new jobs only to see the first paycheck garnished four times in a row. Finally, they pay our lawyers to stop the seizures. You see hiring tax professional to stop a levy is an expensive process also, although an affordable alternative is now available (more on that later).

Continue reading below

FREE Accounting Training from Lorman

Lorman has over 33 years of professional training experience.
Join us for a special report and level up your Accounting knowledge!

Tax Aspects of Operating a Partnership-Taxed Organization
Presented by Langdon T. Owen Jr.

Learn More

To stop a garnishment you lay bare your finances to the IRS and make a deal. You can go this alone or hire a CPA, Attorney or Enrolled Agent to perform this task. Usual fees for a tax professional to remove a garnishment start at $3,500 and travel upward. Further, the entire fee must be paid up front. The levy is so financially devastating that attorney fees not collected in advance are rarely collected at all. The types of income that can be seized via a "Notice of Levy" are wide sweeping. We get calls all the time asking, "They can't take my social security can they?" Our answer - "Didn't you just say they did?" The IRS website states "We could levy property that is yours but is held by someone else (such as your wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of your life insurance, or commissions)."

You will notice the terms used to describe where you could be levied are quite broad. Notice "accounts receivables" making 1099 workers subject to levies. However, the IRS has expanded that to your customers if you own a business. I have even seen construction loans levied at the bank because a sub-contractor employed a guy with tax debt. Mind you, the construction loan was to a developer who hired an engineering firm, who hired a builder, who hired a sheet rock sub-contractor, who hired the person with the tax debt. That is very aggressive on the IRS's part. I'm sure the hapless sheet-rocker will have a difficult time finding work in the same area.

If you have a tax debt issue, we highly suggest making an arrangement with the IRS before a garnishment wipes you out. We know most people with tax debt do not have the ability to write a check to the IRS for the outstanding balance. The IRS knows this as well. If that's your situation, you need some tax relief. A majority of taxpayers qualify for government-sponsored tax relief programs. These programs provide a guilt free sanctuary where this issue can be resolved once and for all. Our company offers Do It Yourself Tax Relief Kits teaching you how to solve your own tax debt issues inexpensively. Support is provided via email from experienced tax professionals.

About the Author
Anthony Cannon, President of Do It Yourself Tax Relief who wrote this article is sure people can solve most tax debt problems themselves without the use of expensive attorneys or tax professional.

His company offers a Do It Yourself Stop Garnishment Kit at:

The material appearing in this web site is for informational purposes only and is not legal advice. Transmission of this information is not intended to create, and receipt does not constitute, an attorney-client relationship. The information provided herein is intended only as general information which may or may not reflect the most current developments. Although these materials may be prepared by professionals, they should not be used as a substitute for professional services. If legal or other professional advice is required, the services of a professional should be sought.

The opinions or viewpoints expressed herein do not necessarily reflect those of Lorman Education Services. All materials and content were prepared by persons and/or entities other than Lorman Education Services, and said other persons and/or entities are solely responsible for their content.

Any links to other web sites are not intended to be referrals or endorsements of these sites. The links provided are maintained by the respective organizations, and they are solely responsible for the content of their own sites.