Never take an IRS wage levy lightly. An IRS wage levy is a collection tactic used by the IRS to collect payment of back taxes.
What Happens in case of an IRS Wage Levy
Your employer will receive an order to withhold. Your employer must then withhold a large portion of your paychecks until the levy is lifted. For the purpose of an IRS wage levy, wage includes your salary, fees, commissions and bonuses. You will however be allowed to use a small portion of your wages – just enough for you to live on. This amount depends on your filing status and number of dependants. Child support and alimony are also not withheld if the court order for child support or alimony is prior to the date of the levy.
When IRS Cannot Levy your wage
Under certain circumstances, the IRS is prevented from levying your wages. If you have submitted an offer in compromise and it is pending with the IRS, the IRS cannot levy your wages. The IRS cannot levy your wages if you have offered to pay your tax debt in an installment agreement. If you have filed for bankruptcy, the IRS is barred by law from levying your wages. If the statute of limitation for your tax debt has expired, the IRS is again prohibited from levying your wages.
Levy Release
The IRS will lift the levy on your wages if you pay off your tax dues or you enter into an offer in compromise with the IRS. If you are ready to pay off your tax debt but the levy is preventing you from doing so, the IRS will lift the levy. You can explain to the IRS that the levy is causing you financial hardship. If the IRS is satisfied with your explanation, it may lift the levy. The IRS will also release the levy if the levy is serviced after the time limit for collection has lapsed or if the wages levied is more than your tax liability.
Getting Legal Help
If you receive a Letter 1058 from the IRS, you must request for a hearing within 30 days failing which your wages will be levied. You have a right of appeal under the Collection Appeals Program. If you file an appeal, the IRS will generally suspend the collection activity during the appeal. If you win your appeal, the IRS will lift the levy. Consult with an experienced tax attorney if you want to appeal an IRS wage levy.
