May 20, 2009

Wage Garnishment? Wage Levy?...Here's what to do

Do you have or are you about to receive a wage garnishment, otherwise known as a levy?...Here's what to do.

If your employer has already received the notice of the levy, IRS form 668W, or 668A, then your next paycheck will be drastically affected by the levy. If you are a W-2 employee, the IRS can levy you for up to 85% of your gross income. If you are self employed and receive 1099 (or "independent contractor") income then the IRS can levy you for up to 100% of your income.

This is obviously going to affect your ability to pay your normal household bills. In order for the levy to stop, you have to secure a release of levy from the IRS.

Here's how....

First, you are going to have to make sure that you are compliant with all of your tax return filings. Meaning, you at minimum, are going to have to make sure that you have filed all returns from 2002 through 2008. If you are missing any of those tax returns, the IRS is not going to even consider releasing the levy, i.e. until you have met the IRS's policy of compliance. So, get your returns prepared and get them done quickly and accurately. HINT: you will want to make sure the income on the returns match up to your IRS Wage and Income Transcripts or IRP files for each tax year.

Next, you will need a resolution for your liability. Meaning, that you will have to secure with the IRS either an Installment Agreement, a Currently Not Collectible status, or submit an Offer In Compromise. Once the resolution is established and agreed to by the IRS, you will need to then have the IRS fax a Release of Levy to your payroll department.

Once the Release of Levy is received by your payroll department, your next paycheck will not be affected by the levy. Now, some levy releases are full releases and some are partial releases. It will all depend on your individual circumstances, total liability, history of compliance and the type of resolution secured.

The best way to keep a levy from happening is to resolve your tax issues prior to the levy being issued. The IRS will send notice's to you of their intent to levy prior to the issuance of the levy. This preview comes in the form of certified mail, notice CP504 Notice of Intent to Levy. If you receive this letter, you have a limited amount of time before the IRS starts to issue levies to your employer, your bank, or your accounts receivable. Don't wait, get your situation resolved immediately or risk losing all or the majority of your income!

1 responses:

Anonymous,  June 12, 2009 at 2:37 PM  

I'm curious. I am under a wage levy for a tax debt. However, the amount levied has been zero. My employer is calculating the levy amount as my take home pay minus the exemption (859.62). Since my take home is around 840, nothing has been taken. Does this sound correct? I know that during the previous 2 years at another employer only 26 was ever paid and that was only due to some accidental overtime.

If it is correct, then should I just leave well enough alone? According to the assessment, this debt was incurred 12/31/00, so I'm thinking the Statute of Limitations will run out in 18 months.


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