If you go into the Internal Revenue Service collections process for delinquent taxes, you will be notified and offered payment arrangements before the agency garnishes your wages. The IRS does not have to get a judgment, like other creditors do, to start garnishing, but it tries to work with you before taking that drastic step. You'll receive at least two notices, one itemizing the amount you owe with a deadline for full payment and a final notice letting you know the IRS plans to garnish your wages. You have 30 days to respond to the final notice and work out other payment arrangements.
Dealing With Unpaid Taxes
The IRS will work with you if you don't have the money to take care of delinquent taxes when you file your tax return. You can set up a monthly payment plan, settle the debt with an offer in compromise or even file for bankruptcy if necessary. You can apply for an installment plan online if you owe less than $50,000 and have filed all your tax returns. An offer in compromise allows you to settle with the IRS for less than the full amount of your taxes.
Respond or Risk Penalties
The only way the IRS will garnish your wages is if you ignore its attempts to collect the debt and don't contact the agency about other options for payment by the deadline. The lesson here is that you shouldn't ignore the notice and should attempt to reach a mutually agreeable solution. If not, the IRS can take your assets, put liens on your property, claim future tax refunds or take part of your paycheck.
Amount of Garnishment
Most creditors have to get a court order or judgment to take money from your paycheck. The IRS does not. But, it is still limited by the tax code. The code requires the IRS to leave you enough for your basic living expenses and is based on your filing status and the number of exemptions you claim. These thresholds apply no matter what tax bracket you're in. For example, if you're single, claim three exemptions, and get paid every two weeks, you can exempt $694.23 from every paycheck. But if you're married, claim four exemptions and get paid weekly, you can keep $542.31 from each paycheck.
Other options besides garnishment include bankruptcy, innocent spouse relief and a temporary delay for hardship. Bankruptcy does not erase all your back taxes, but it can alleviate any that were due three years before you filed for bankruptcy. Innocent spouse relief applies if your spouse underreported taxes and you were unaware of it. This can release you from the responsibility of penalties and fees. One short-term remedy is to claim a temporary hardship, but you can only claim this if your expenses exceed your income. This last option can buy you some time, but you'll eventually have to pay the taxes.
Chris Brantley began writing professionally for a financial analysis firm in 1997. From 2000 to 2004, he worked as a financial advisor, specializing in retirement planning and earned his Series 7, Series 66 and insurance licenses. Brantley started his full-time writing career in 2012 and has written for a variety of financial websites, including insurance, real estate, loan and investment sites. He holds a Bachelor of Arts in English from the University of Georgia.