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Wage garnishment is often the most feared part of the IRS collection process. It can result in receiving a much smaller paycheck for years. However, the IRS doesn’t simply jump to garnishing your wages when you don’t pay your income tax bill. It is one of the final steps of the tax collection process and the IRS is often willing to work with taxpayers to come up with alternatives to garnishment. In the sections that follow, we will explain what it means for the IRS to garnish your wages and the options you have for stopping the agency from doing so.

What Is Wage Garnishment?

Simply put, wage garnishment is the legal procedure through which a portion of a person’s earnings are withheld by an employer for the purposes of paying a debt, such as unpaid taxes, child support, creditors, and debt collectors. What sets the IRS apart from most other creditors is that it does not need a court order and often garnishes as much as 70% of your monthly income. However, the IRS by law must take multiple steps before it can garnish your wages and must give you the opportunity to challenge its actions.

How Much of My Wages Can the IRS Garnish?

Under federal law, most creditors are limited to garnishing up to 25% of your disposable wages. However, the IRS is not like most creditors and often garnishes up to 70% of your disposable income each pay period. Fortunately, a portion of your wages are exempt from levy and must be paid to you, regardless of how much you owe the IRS.

The exempted amount is calculated using the federal standard deduction and based on your filing status and the number of dependents you can claim for the year the levy is served. The IRS will send your employer information explaining to your employer how to calculate the amount exempt from levy.

According to the table provided by the IRS for 2023, a single taxpayer with no dependents can only exempt $1,154.17 a month ($53.27 per day) from garnishment. Any income the individual receives above that amount will be paid to the IRS. A married taxpayer filing a joint return with two dependents can claim an exemption of up to $2,308.33 a month ($106.54 a day).

IRS Collection Process

IRS wage garnishment, technically a wage levy, is part of the final step of the agency’s process for collecting back taxes. The process gives taxpayers a number of opportunities to either appeal their tax bill or come to an alternative arrangement with the IRS. U.S. tax law governs the IRS collection process and the agency must follow the legal procedures laid out in the Internal Revenue Code by Congress. The collection process starts when the IRS sends you a bill for your unpaid taxes. The process is completed when you have either paid what you owe or the time period the IRS has to collect has expired.

The first notice the IRS issues is a letter explaining that you have an unpaid balance and demanding that you pay your full tax bill. The notice will include the tax owed, any penalties assessed, and interest accrued on the balance shown on your account. You should pay your tax liability as early as possible. The interest compounds daily and the IRS can impose a monthly late payment penalty.