I’m Married with No Kids. Why Should I Set up a Payment Plan Rather than Just Letting a Wage Garnishment Continue?
The IRS decides how much money to garnish based on your filing status and number of exemptions. A married couple that file together and have no children would have two exemptions. According to the IRS table, the amount of money exempt from being garnished in this situation is $1716.67 per month. The amount with which you are left in each paycheck depends on how often you get paid. The breakdown is as follows:
- Daily $79.23
- Weekly $396.15
- Biweekly $792.31
- Semimonthly $858.33
- Monthly $1716.67
How Much the IRS Takes
Because the IRS determines how much money is exempt from the wage garnishment rather than taking a percentage of the income as other creditors do, the amount of money you end up paying the IRS towards your debt is completely dependent upon your total wages or salary. The IRS takes everything left over after exempting the amount based on your filling status.
For example, if you make $5,000 per month, then the IRS will get almost $3,300 per month from your paycheck, leaving you with just the roughly $1700 dollars that was exempt. If you make only $2,000 per month, then the IRS only receives almost $300 per month from your paycheck.
You Can Save Money
One of the best benefits of setting up an Installment Agreement, also known as a payment plan, rather than letting the wage garnishment continue is simply that you can save money. The amount of money you can save also depends on how much money you make and how much you plan to pay every month. In the example of a person making $5,000 per month, an Installment Agreement could save a significant amount of money. For example, if this person negotiated to pay $800 per month, then he or she will save $2500 per month. Additionally, you may be able to save money on tax penalties and interest, depending on your finalized settlement agreement.
Other Benefits of an Installment Agreement
Even if you do not save a significant amount of money by using an Installment Agreement to pay your federal tax debt, you still will benefit because you will have more control over your own paycheck. When the IRS enacts a wage garnishment, they work directly with your employer and take the money before you ever receive your paycheck. This may interfere with your ability to pay your rent, utility bills, car payments, and other regular expenses. When you set up an Installment Agreement, you make the terms for when and how to pay. This can help you budget your monthly expenses easier and ensure that you do not end up in deeper financial difficulty.
If you want to set up an Installment Agreement or some other IRS settlement, contact Fidelity Tax Relief today. Our tax professionals can help you to find the right resolution for your federal tax debt and save you from further financial difficulty.