Sometimes, no matter how careful you are about filing your taxes and paying what you owe, the time may come when you have a bill that you can’t pay.   Like all creditors, the Internal Revenue Service will try to collect what you owe using several different means.  One of those methods is via a wage garnishment.

Employers are prohibited from letting you go because of a wage garnishment issue, a protection extended under the Consumer Credit Protection Act.  However, you get only one “get out of garnishment jail free card.” A second garnishment isn’t protected by Uncle Sam, and an employer who views an employee with a second garnishment as a mark on his or her character has every right to fire them.

What is Wage Garnishment?

Simply put, a wage garnishment is when the IRS locates a debtor’s employer and takes their wages during each pay period until the debt is paid in full.  A wage garnishment can be used to collect a debt that you owe due to a late filing.  It can also be used when you file your return correctly but do not pay the full balance of your debt.

A wage garnishment is most commonly levied by the IRS or via a court ruling.  To implement the garnishment, the IRS obtains a judgment and sends it to the debtor’s employer.  The employer is then required to withhold a certain amount of the individual’s paycheck each pay period and send it to the IRS until the debt has been fully paid.  Depending on state laws, a garnishment may take anywhere from 30 percent to 70 percent of your paycheck to cover your unpaid debts.

Furthermore, the IRS is particularly tough; it can garnish both your income and, if you’re retired and collecting government benefits, can take your Social Security checks, too.  The levy usually isn’t lifted until the debt is paid off in full.  However, you do have some options, though, as outlined by the IRS.

Stopping A Wage Garnishment

Pay off the debt in full.  Once that’s done, the garnishment is automatically lifted.  This is the quickest and least painful way to get the IRS off your back.

Offer a lower bulk payment as compromise.  If you can negotiate a “payoff” sum with the IRS, you can also avoid a wage garnishment.  This one’s tricky though, and you’re better off checking in with a tax professional before you climb into the ring with the IRS.

Ask the IRS for a payment plan.  Uncle Sam may be willing to negotiate regular monthly payments to erase your debts and avoid the need to garnish your wages at all.  However, just note that this is typically only granted if you demonstrate that the levy is causing you financial hardship.  Thus, if you are receiving notices of tax debt owed, but have yet to have your wages garnished, it’s best to try and set up a payment plan BEFORE this IRS begins garnishments.  Once the garnishment is in place, the IRS has little impetus (other than the hardship situation) to revert to a payment plan if it’s collecting money from you.

Quit your job and dodge the IRS for a while.  If you quit your job, it will probably take the IRS a few months to track you down at your new job.  They won’t like it, but at least your wages won’t be garnished in your new job (for the short term, anyway).  That might buy you some time to come up with the money to settle your debt.

File for bankruptcy.  This option should not be used lightly, but if it’s “last resort” time, bankruptcy can at least help you avoid wage garnishment, or have it released if the garnishment is already in place.

Don’t create a garnishment to begin with.   The best way to avoid a wage garnishment may be old-fashioned, but it works all the time.  Pay your bills on time, save some money for emergencies and spend less than you earn.  Do that and neither your employer nor the IRS will be dogging you about wage garnishments ever again.