When you do not pay your federal tax debt, then the IRS has the right to take action to ensure repayment. One course of action they may take is to levy your assets, including enacting a levy against your wages, salary, or other source of income. This action is more commonly known as a wage garnishment. When you find yourself with a tax garnishment, you can stop it by taking one of the following actions.
1. Pay off your Debt
The best way to stop tax garnishment is to simply pay off all your tax liability, including any penalties and interest. Once your federal tax debt is paid in full, the IRS will begin the process of removing the tax levy against your income. It may take up to 30 days for the garnishment to be removed from your wages. If you cannot afford to pay your IRS tax debt in full, you can try another course of action.
2. Apply for an Installment Agreement
The IRS has a payment plan option that will help you to pay down what you owe at a reasonable amount that will not create a financial hardship for you. With an installment agreement, you will negotiate terms with the IRS to pay down the amount, including any penalties and interest, over a period of time, typically 5 years. Once the installment agreement is in place, your wage garnishment will be removed.
3. Negotiate an Offer in Compromise
If you are unable to pay your federal tax debt, even if it is broken down into monthly payments, then you have the option to negotiate an Offer in Compromise. In this case, you and the IRS agree upon an amount that you can pay, and the rest of your debt is forgiven. Once you have completed the Offer in Compromise, any tax garnishment and other levies or liens will be removed.
4. Demonstrate Financial Hardship
If your wage garnishment creates a financial hardship for you, then you can demonstrate this to the IRS and ask for the wage garnishment to be removed. You have to fill out certain forms and show proof of your financial situation. You will still be liable for the monies owed, including interest and penalties; however, you will no longer have your wages taken from you.
5. Apply for Bankruptcy
No one wants to apply for bankruptcy, but it is a last resort to stop a tax garnishment. Bankruptcy affects all aspects of your financial situation, and can damage your ability to take out loans or mortgages in the future. There are ways to stop any collection action against you by the IRS before you have to file for bankruptcy. If you do choose to do this, it will stop the garnishment, at least for a time. However, you will still be liable for your tax debt.
Owing significant funds to the IRS can be devastating and lead to a lot of stress. If you do not pay, then this burden intensifies, especially if they begin to garnish your wages. You can take action to stop this and regain control over your life. Working with a tax professional will ensure that you take the right action and find the best way to pay down your loan and be free of the IRS.