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Tax Help FAQs: IRS Wage Garnishments

What is an IRS wage garnishment?

IRS wage garnishments or imposing a levy is another method the IRS often uses to collect any back taxes that you owe. The terms garnishment and levy mean the same thing when it comes to IRS seizures. Although your wages and bank accounts are usually the targets, it can also apply to the seizure of your home, equipment, furniture, vehicles or other possessions of value.

When the IRS places a bank levy on your bank account, the bank has a legal obligation to turn over all monies in your accounts. It doesn't matter where the money came from or whether or not it is even your money. The fact that you have it in your bank account is all that is needed. Most people have direct deposit for their pensions, Social Security, child support, etc., but the IRS does not check the records to find out the source of the funds. Once the money is deposited in your account, it loses its identity.

If an IRS wage garnishment or levy has been imposed on you, it will remain in place until you have paid the tax bill in full. Sometimes, when the amount reaches a manageable status, the IRS may release the levy. However, once the IRS has garnished the money in your bank account, it is not permitted to do so a second time. This means that you will only lose your savings once and after that any funds that come into the account are yours once again. The exception to this is the state of Massachusetts. Here, the funds that come into a bank account are garnished for a period of six months. Generally Social Security benefits are exempt from levies. Exceptions can be made if the government has to collect Federal taxes or delinquent child support payments.

If your salary is garnished, then the levy stays in force until you have the account paid off. There is a limit as to how much of your wages can be taken for IRS tax payments. It is not allowed to exceed 25% of your weekly income. There are also exceptions to this rule. If you have a high-paying job and earn more than the federal minimum hourly wage, then the garnishment could be the amount by which your income exceeds thirty times that minimum hourly wage. The IRS can take everything you earn above $3.83 an hour, which wouldn't leave you with very much money. Actually, the IRS takes the lesser amount. If you support your spouse and have dependent children, the levy cannot exceed 50% of your net income, but it you are single, that percentage rises to 60%.

The law protects you if your wages have been garnished. Your employer is not permitted to fire you because of the action and any employer that does so could be subject to penalties of up to $1,000 or have to serve a prison term of up to one year.

Can the IRS keep imposing garnishments or levies on my bank account?

If a wage garnishment or IRS levy has been imposed on you, it will remain in place until you have paid the tax bill in full. Sometimes, when the amount reaches a manageable status, the IRS may release the levy. However, once the IRS has garnished the money in your bank account, it is not permitted to do so a second time. This means that you will only lose your savings once and after that any funds that come into the account are yours once again.

What is the typical amount levied/garnished from a taxpayer's paycheck?

This is a formula driven process, however, the typically amount is 30-70% of the gross paycheck.

Can the IRS garnish Social Security income?

YES, the IRS CAN garnish your Social Security Retirement benefit! This is a relatively new program, though it was apparently authorized under legislation from several years ago. If your monthly benefit is more than $750, they may garnish 15% of your monthly benefit for taxes that are at least six months in arrears. (This doesn't apply to certain Social Security Disability benefis and perhaps other types of Soc. Sec. benefits, but it does apply to S.S. Retirement. I know, because I just got a letter from the IRS notifying me that they'll be taking $207 from my monthly payment.) The IRS is required to notify you before it begins to garnish your Soc. Sec., but in my case the notice arrived just two days in advance. You can appeal the garnishment for reasons of "hardship," but you should do it immediately upon receiving the notice, or they'll garnish your next payment.