Wage garnishment or wage levy is one of the most frequent tax levy tools used by the IRS and state taxing authorities to collect back taxes or tax debts. IRS, however, uses wage garnishment or a levy on salary and wages only as a last resort and only when its other options are exhausted. Before instituting a wage or salary levy, the IRS is required to send taxpayer a Notice of Lien or Levy. Section 6331(e) of the Internal Revenue Code (Tax Code) provides that a wage levy is continuous from the date such levy is first made until the levy is released. Section 6331(h)(1) of the Tax Code limits the amount of such continuous wage or salary levies to a maximum of 15% of the amounts due to taxpayer. In addition, Section 6334(d)(2) of the Tax Code exempts a portion of weekly wages from the amounts withheld from an individual’s salary as wage garnishment. The amount of exemption is sum of standard deductions plus aggregate amount of the deductions for personal exemptions divided by 52.
Pension and retirement income are not exempt from wage lien or levy rules and the IRS may subject pension and retirement income to lien or levies.
It should be noted that during the period wage levy is in effect, the taxpayer continues to pay interest and penalty on the unpaid tax. To make an analogy, an individual who owes money to his credit card company but keeps paying the minimum amount due, is still paying interest on his total credit card debt. The interest rate on a tax debt is usually higher than the commercial rate. In addition, the taxpayer is assessed a tax penalty which sometimes can exceed the amount of the original tax. However, the real drawback for a taxpayer whose wages are garnished is that the employer’s knowledge of the fact that an employee is a delinquent taxpayer may result in negative employment consequences such as job loss.
IRS collection actions fall under Fair Tax Collection Practices which is the subject of Section 6304 of the Tax Code. For example, if the IRS knows that the taxpayer is represented by a lawyer, it cannot contact the taxpayer. In addition, the IRS is barred from engaging in conduct the natural consequence of which is to harass, oppress or abuse the taxpayer.
If you are the subject of IRS salary garnishment or part of your salary is withheld as wage levy, contact Kamyar Mehdiyoun, IRS and tax lawyer in Rockville, Maryland. We are a taxation law firm specializing in IRS and tax problem resolution and tax dispute matters and will help you in removing or minimizing the amounts withheld from your wages.