Short answer, yes. However, you will need the advice, guidance, and representation of an experienced tax relief professional. The IRS has the reach and the right to garnish wages and other income sources. The IRS will use its reach to collect after several notices have gone unanswered. By the time a wage garnishment is sought, a significant amount of time has passed.
The reversal of a wage garnishment will take time, depending upon the stage of the collection process.
Wage Garnishment Defined
A garnishment is a court order allowing for a person’s property, in this instance wages, to be seized and reverted to a third party, i.e., the IRS, to satisfy a debt. A garnishment can also attach to some pension and retirement income.
If garnishment is granted to the IRS by a court, then From 668-W is sent to the employer with instructions to remit the stated amount to the IRS. Garnished wages are taxable as though paid to the employee. The withheld amount is based upon a formula and certain criteria the IRS follows for filing status and the number of dependents within the tax household.
Wage Garnishment Halted
Once the IRS institutes its collection process, the actual wage seizure can be halted but it will take time. The amount of time will depend upon where in the process the delinquency falls.
Initially, the IRS will use its wage garnishment power to get the delinquent taxpayer’s attention. The Intent to Levy is the IRS’s way of extending time to allow for a response. The best way to avoid the actual seizure of wages is to respond to the Intent to Levy with the representation of a tax professional.
There are seven methods to release a garnishment and halt collection proceedings. These methods are listed and discussed below.
- Expiration of the statute of limitations
- Pay the back taxes
- Negotiate an installment agreement
- Request an offer in compromise
- Request a Currently Not Collectible (CNC) status
- Confirm an active military service designation, or
- Request a reconsideration.
1. Statute of Limitations
The statute of limitations to collect a federal tax lien is 10 years. However, this 10-year period begins the day the tax is assessed, not when the return is filed. The assessment date is when an IRS officer enters the debt into the taxpayer’s account.
The IRS cannot continue with collection efforts once the 10-year period has passed. There are instances where the collection can continue beyond this period, but the circumstances are narrow and specific.
2. Pay the Amount Due
If you are in the unfortunate position of owing the IRS but are able to pay, then you are in a very small group. Taxes may have gone unpaid through a misunderstanding, a move, or a dispute. Whatever the reason, pay the amount due as soon as the delinquent amount becomes known. The IRS accepts cash, check, money order, same-day wires, or online payments through the IRS2GO app.
3. Negotiate an Installment Agreement
An installment agreement is a popular solution sought by many taxpayers. The IRS offers payment periods from 36 months (3 years) to 84 months (7 years). Most installment agreements can be initiated online.
However, before entering into an agreement, be sure the conditions and the fees associated with the payment plan are known and understood. It is best to seek the advice of a tax consultant before agreeing to any installment plan.
4. Request an Offer in Compromise
Offer in compromise will allow taxpayers to settle the debt for less than what is owed. The IRS approves ~40% of the offers it receives.
The process is technical and structured, and the advice and representation of an experienced tax professional is the best assurance that an offer will fall into the 40% approval category.
Along with the periodic payments under an offer in compromise, the taxpayer must also surrender all rights to tax credits and refunds until the negotiated amount is fully paid. Hence, it is in your best interest to work with a taxprofessional for the best results.
5. Request the Currently Not Collectible (CNC) Status
A CNC status is granted to taxpayers who are in dire straits and cannot pay any amount without substantial hardship to their family and living conditions. A “substantial hardship” is the inability to buy food, pay rent and utilities, or provide basic medical needs.
The CNC status is granted only after an extensive review of the taxpayer’s income and living expenses, and after specific IRS-mandated changes in lifestyle. However, all collection attempts are halted if a CNC status is granted. However, the status does not halt the accrual of interest and penalties, and the status is not permanent.
The IRS will review the taxpayer’s ability to pay every 6-24 months after the status is approved. If the IRS determines that the taxpayer’s financial position has improved to the point where something can be paid, then the CNC status is lifted, and the IRS will present a payment plan.
The 10-year statute of limitations period will continue to run when the CNC status is in place.
6. Military Service Designation
Generally, the IRS cannot seek a levy on an active military service person, or against their spouse, when stationed in a combat zone, serving in a contingency operation, or performing a qualified hazardous duty. These zones and duties are identified by the Department of Defense and Congress, respectively.
The lock-out period for the IRS runs from the start date of the duty through 6 months after the discharge of the duty.
7. Request for Reconsideration
When a taxpayer does not file a return and the IRS has a record of income sources, the IRS will take the initiative and prepare a return from the W-2s, 1099s, and other evidence of income. No consideration will be given to filing status, dependents, or tax credits. The return prepared by the IRS will oftenresult in a higher tax liability. The collection process will begin on this higher delinquency amount with the accrual of interest and penalties.
A taxpayer can file a tax return showing the proper filing status, income, deductions, credits, and dependents through the audit reconsideration process.
Many taxpayers often resign themselves to thinking, because too much time has passed, that nothing can be done to halt a collection or a garnishment. In some cases, this is true; but in many, it is not.
A taxpayer’s action on any of the seven methods above may take time for the collection process to halt, but it could happen.
The best practice is to retain the services of a professional tax consultant at the receipt of the first notice before getting too far into the collection process. A proactive stance with complete and honest responses will go a long way in negotiating a favorable settlement.
Have You Been within the IRS’s Collection Process and Need Advice on Proceeding Toward a Favorable Settlement? Contact Anderson Bradshaw Tax Consulting Today
The tax professionals and consultants at Anderson Bradshaw Tax Consulting can help with any tax situation. With over 30 years of experience in the industry, we have seen almost every tax issue and have learned the best ways to handle each situation. You can feel confident knowing your difficulties with the IRS can be resolved and corrected quickly and efficiently at Anderson Bradshaw.