Tax garnishment is a collection method used by the IRS to seize a portion of a taxpayer’s wages, bank accounts, or other assets to recover unpaid tax debts. When a taxpayer fails to resolve their tax liability, the IRS can issue a Notice of Levy, instructing the taxpayer’s employer, bank, or other financial institution to withhold a portion of their income or assets and send it directly to the IRS.
The garnishment process typically follows several steps:
- The IRS sends multiple notices demanding payment, including a Final Notice of Intent to Levy.
- If the taxpayer does not respond or make payment arrangements, the IRS issues a levy to the taxpayer’s employer or bank.
- A portion of the taxpayer’s wages or funds is garnished and applied to the outstanding tax debt until the full amount is collected.
Wage garnishment can significantly impact a taxpayer’s finances, as it reduces their take-home pay and may cause difficulties in meeting living expenses. However, taxpayers can stop a garnishment by:
- Paying the full amount owed.
- Setting up an Installment Agreement or submitting an Offer in Compromise.
- Requesting a Collection Due Process (CDP) hearing if they believe the garnishment is unjust.
Working with the IRS to resolve tax debt early can prevent garnishments and other aggressive collection actions.