Understanding the Difference Between Levies and Wage Garnishments

The IRS uses bank levies and wage garnishments to collect unpaid taxes, which is why the two processes are often confused. They are both collection actions, but the similarity ends there.

IRS Bank Levies

When the IRS issues a bank levy, it freezes your bank account and withdraws the amount you owe. If there isn’t enough money in the account, the IRS will keep placing levies on it once more funds are available, and stop only when the debt is paid.

The process starts when the IRS sends you a Notice and Demand for Payment, which indicates how much you owe (including interest and penalties). If you don’t pay, the IRS will issue a Final Notice of Intent to Levy and Notice of Your Right to A Hearing, which gives you 30 days to pay the debt, file an appeal, or take other action to resolve the issue. If you do anything, the next step is issuing a bank levy.

Once your account is frozen, you only have 21 days before the bank releases your money to the IRS. Your next step should be a consultation with a Seattle tax attorney who can help you take steps to unfreeze the account and deal with the tax debt in a less obstructive manner.

IRS Wage Garnishment

With wage garnishment, the IRS takes money out of your paycheck before it gets deposited into your account. Money will continue to be withdrawn from each paycheck until your tax debt is paid or you reach an agreement with the IRS that stops the collection.

The wage garnishment process starts when you receive a written notice that states how much you owe (including penalties and interest) and provides a due date. If you don’t pay the balance in full, you will receive a notice entitled Final Notice of Intent to Levy. Thirty days later, if the debt remains unpaid and no other action is taken to resolve the debt, the IRS will start garnishing your income, which includes your salary, hourly wages, bonuses, and commissions.

Although the IRS isn’t the only creditor that can garnish your wages, it is unique in that it doesn’t have to get a judgment against you first and it can take more money than regular creditors.  The amount you get to keep is based on the number of dependents you claim on your tax return and your filing status and can be as high as 70% of your income.

Can You Stop It?

The answer is yes! You can stop wage garnishments or have a bank levy lifted by working with a tax attorney to propose an installment agreement, which lets you pay your tax debt in increments over a three-year period, an offer in compromise, in which the IRS agrees to settle the debt for less than what you owe, or another appropriate form of tax relief.

Contact a Seattle Tax Attorney

If you have received a notice of levy or wage garnishment or are concerned that you will soon, the experienced team at Boeshaar Law can help. We will work with you to prepare and present a Payment Plan, Offer in Compromise, or another sustainable arrangement that addresses your tax debt. If you are experiencing significant financial hardship, we can also help you qualify for the “Currently Not Collectible” program until your economic situation improves. For more information, contact us or call (206) 899-4860.

Written by Robert V. Boeshaar

Robert V. Boeshaar

Robert V. Boeshaar is a Seattle tax attorney committed to helping individuals and small businesses who are facing problems with the IRS. He believes in using his experience to serve others and to make a difference in their lives.