Several months ago we met with a taxpayer who was subject to an IRS wage levy for 2002 and 2003 back taxes and wanted to know how to stop the wage garnishment.
Upon receipt of the IRS Notice of Levy his employer was required to withhold and remit a substantial portion of the taxpayer’s wages to the IRS. If the employer failed to honor the IRS wage garnishment it would have been liable for the amount it failed to pay over to the IRS plus penalties and interest.
The amount of an employee’s salary exempt from levy depends on his/her tax filing status, number of dependents, and frequency of pay and is calculated with the help of an IRS table. The taxpayer in this case was single with no dependents and was paid weekly. The taxpayer’s gross weekly pay was $1700. From this amount the taxpayer’s regular federal income tax and social security was withheld and remitted to the IRS as usual. Based upon the IRS tables the taxpayer was allowed to keep only $195 (exempt amount) and the employer sent the balance of the net pay to the IRS as a result of the wage levy.
Once we were retained by the taxpayer we immediately contacted the IRS and were able to obtain a partial release of the levy which would allow the taxpayer to keep more of his pay. We began to analyze the taxpayer’s tax problem and financial condition in order to determine the best possible solution to stop the wage garnishment. As part of this process we obtained the taxpayer’s IRS transcripts and found that the statute of limitations on collections was to expire in less than two months. Generally, the IRS has ten years from the assessment date of the tax to collect it from you. After the ten year period has passed you no longer owe the tax and the IRS must stop collection activities. There are certain times when the running of the statute of limitations is temporarily stopped which will extend the collection period beyond ten years.
We informed the taxpayer that the collection period would shortly expire. After several days he reached a decision to take a vacation for the next two months as he did not want to work and have the IRS garnish his wages, nor did he want to make an alternative payment arrangement with the IRS, which would require him to disclose his financial condition.
The taxpayer’s decision in this case may seem a bit extreme and clearly may not be the answer to your IRS wage levy problems. At East Coast Tax Consulting Group we’ll do what it takes to stop your IRS wage garnishment and find a workable solution that puts an end to your tax problems once and for all.