Wage Levy vs Garnishment

Posted on November 11, 2021

The terms wage levy and wage garnishment are often confused and used interchangeably. Both are legal actions to seize assets to settle a debt. Both terms are used when there is a creditor and debtor involved. When it comes to taxes, the creditor can be viewed as the IRS, while the debtor is the taxpayer.

When the IRS issues a levy, it freezes your assets, including your wages. If you owe the IRS money and have failed to pay your debt, the IRS may issue a wage levy on you to help them take what you owe. This means there is a legal order to freeze the bank account where your wages are deposited, and the IRS can seize the money in it.

On the other hand, wage garnishment is the legal order that allows your employer to take a portion of your wages and hand it over to the IRS. The wage garnishment on your account becomes part of the payroll process, and the employer is required to make deductions until the IRS is satisfied that the debt has been settled. Therefore, an employer that refused a wage garnishment order would be breaking the law. And according to the Department of Labor, wages include but are not limited to salaries, commissions, bonuses, overtime, and even vacation pay. The IRS can even garnish your earnings from your retirement and pension plans.

However, a wage levy doesn’t mean that the IRS will freeze your bank accounts entirely and leave you with no money. The IRS decides how much you need to live and utilizes a table to determine how much they can levy. And the amount will take into consideration the number of dependents you claim, frequency of pay, and your filing status.

When the IRS issues a wage levy on you, part of your wages will be sent to them each pay period until the amount of your overdue taxes have been paid off. Seizure of your wages may also stop if you make other arrangements to pay your outstanding taxes, such as a payment agreement. However, some of your wages may be exempt from the levy, and the amount is determined by qualified dependents you have. Child support may also be exempted from the amount the IRS levies.

Avoiding or reversing a wage levy

The IRS will send several notices to you requesting payment before issuing a wage garnishment order to your employer. You have opportunities to avoid a wage garnishment order by simply paying your tax debt. However, that easy solution is not available to everyone.

If you’ve already been hit with a wage garnishment order, the best solution is to negotiate with the IRS. Beyond levying your wages, the IRS may levy your bank account and Social Security benefits. If you feel you are not qualified or fear negotiating with the IRS, it would be best to consult with tax resolution experts.

For help with preventing or reversing a wage levy, contact us at 206-970-4477 and let us help you with your tax problems. Talk with a Tax Resolution Expert today.