The IRS often uses a wage garnishment (levy) as a method to collect unpaid back taxes from you. The levy process begins with the IRS sending your employer Form 668-W, Notice of Levy on Wages and Other Income.
Your employer will then give you a “Statement of Exemptions and Filing Status” to complete. The statement asks for your tax return filing status and number of personal exemptions. This information will be used by your employer to determine the amount of your wages exempt from IRS levy. If you don’t return the statement to your employer within three days your filing status will be considered as married filing separately and you will only be entitled to one exemption. In most cases this will result in a lower exempt amount.
The exempt amount is calculated by your employer using tables provided by the IRS based upon your tax return filing status and the number of your personal exemptions. For example, in 2012, if you are single, claim four personal exemptions and are paid weekly, the exempt amount is $406.73.
Your employer will send the IRS the amount remaining after deducting the exempt amount from your regular “take home pay”. This means the IRS will allow the usual deductions from your paycheck such as federal and state income taxes, health insurance, union dues, if they were in effect prior to the levy.
Example: Assume a taxpayer’s filing status is married filing jointly, with four exemptions and a weekly salary of $1500. The 2012 IRS Publication 1494 tables show an “exempt” amount of $521.15. The employee’s regular take home pay is $1021.15 after deductions for FICA taxes, current income taxes and health insurance. The employer will send the remaining $500 to the IRS.
A levy on your wages has a continuous effect as it attaches to your future paychecks, until the levy is satisfied or released. Therefore, it is in your best interest to seek immediate tax resolution help from a CPA or tax attorney who will work for you to remove the IRS wage garnishment (levy).