IRS solution???

Question

I have been told by my employer that they are going to start deducting 100% of my paycheck until a $5000 bill is paid. This is termed a "levy". I called one of those tax negotiation companies and and was told that I don't qualify for an Offer in Compromise because I make too much money. Has anyone dealt with the IRS successfully?

Answer 1

First of all you can count on this information that I am providing. I am an Enrolled Agent, licensed by the IRS to represent taxpayers and I handle these issues everyday.

A few things.

I. There is no such thing as a 100% wage levy. The amount is substancial, but it is not 100%. If you would like to see exactly how much will be deducted from your paycheck via an IRS wage levy, you can refer to the following tables to calculate the amount: http://www.irs.gov/pub/irs-pdf/p1494.pdf

II. Chances are you do not qualify for an Offer in
Compromise if you only owe the IRS $5k and are still actively working. The offer in compromise program is hugely overpromoted by poor tax resolution companies looking to make a quick buck.

III. It is possible to have the wage levy removed immediately and before any money is taken out of your paycheck, but you have to act quickly. It will be necessary for you to be in compliance, meaning you are current on all of your tax filings to date.

IV. Acting quickly may also help you avoid a tax lien which will have harsh consequenes on your credit report and credit score.

V. If the amount of tax you owe is based upon a tax return the IRS filed for you, you will most likely want to file a return to replace the IRS substitute for return to reduce the liability.

V. In addition to the wage garnishment, you are also currently subject to bank levy action. That means that as of RIGHT NOW THE IRS CAN LEVY YOUR BANK ACCOUNT AND TAKE ANY MONEY YOU HAVE IN IT UP TO THE AMOUNT OF TAX DUE. You need to resolve your issue immediately to prevent this from happening. Once the IRS levies a bank account it is nearly impossible to get them to release the funds.

VI. The best way to resolve your tax debt is likely going to be by setting up what is called a guaranteed or streamlined installment agreeement. For information on these types of agreements you can view a short video I have put togather free of charge on my youtube channel at: http://youtube.com/watch?v=b5SnqFLTJGY

I hope this information helps.


Christopher R. Jacquez, EA

President, eTaxrelief.com

Answer 2

Something is fishy here. There is no such thing as a 100%
levy on your salary, by the IRS or anyone else. Levies (actually wage attachments) are typically limited to the portion of your pay classified as disposable income, and then only to a portion of that. That can be a significant chunk if you earn a lot and live a frugal lifestyle but it NEVER equals 100% of your pay.

Demand that your employer show you a copy of the wage attachment letter or garnishment order. That will explicitly state the dollar amount of the attachment or garnishment.

When the IRS or state tax authorities issue a wage attachment letter, it will come as no surprise to you. They would have sent you at least 5 letters demanding that you settle your debt or set up a payment arrangement. They would then request information on your income and living expenses in order to determine your disposable income for a wage attachment. If you ignored that letter they would proceed with the attachment assuming that all of your income was disposable but at worst you'd be looking at no more than 25% to 50% of your gross pay, NOT 100%.

Wage garnishments work similarly. The court would demand that you provide information on your income and living expenses and then issue the garnishment order based upon your disposable income using the guidelines in state law. (And some states like FL or TX don't allow wage garnishments for commercial judgements under any circumstances.)

My guess is that your employer claims that you owe them the money directly. Even if that is the case, they must proceed as they would against any other debtor -- file suit, get a judgement, and file for a garnishment order -- before they could take any portion of your pay without your consent.

About the only exception to that rule is if you were significantly overpaid over a very short period of time and they were recovering the overpayment from your next couple of paychecks. Even under that circumstance they generally have to recover the overpayment in the same manner as they paid it to you. For example, if you were overpaid $1,000 per week for 5 weeks, they could generally dock you $1,000 per week for 5 weeks to recover the overpayment.

Demand that your employer show you the letters or orders that you have recveived and proceed from there. As I said, something is VERY fishy here as 100% just does not hapen.

Answer 3

100% is over the top for a wage levy. IRS will take a huge chunk leaving, for example, only $336.54 in takehome pay for a single person paid every two weeks. The link is to the publication that shows the exemption. If you can pay the liability in full within five years along with current taxes, you should be able to negotiate an installment agreement.

I am an enrolled agent who prepares offer in compromise forms for clients. I haven't yet had one who only owed $5,000. The company you called probably wouldn't want to deal with you because their fees are normally in the $3,000 and up range which is pretty outrageous for a $5,000 liability. In your case, I doubt that my $500 minimum fee for a basic really small dollar case would be worth considering.

Answer 4

1. Are you single or married and are they talking about a joint return or a single return?

If you are single, they can NOT take 100% of your salary. If you are married and both are wage earners, they CAN.

If you have reached this point, it means that you have been avoiding the IRS contacts. That's a huge mistake. Now that they have the garnishment, the chances are that they will not negotiate further. However, it is still worth contacting them and talking to them about reducing the amount.

TO ANYONE READING THIS: If the IRS contacts you about back taxes or ANY other issue, be sure you talk to them. They're actually pretty easy to deal with if you have contact with them on the front end. Once your file is turned over to a real collections person .... and once they have your assets in sight .... it becomes much more difficult. Do NOT ignore them - they will NOT go away - they WILL find you - and they WILL get their money!

Answer 5

IRS will levy your wages because you have not made an attempt to pay off the amount owed. Call IRS and work out a payment agreement.
Call 1-800-829-1040 or the phone number listed in your letter from the IRS.
IRS will work with you but you must work with IRS also.

Answer 6

You should contact the IRS to arrange a payment plan. Payment plans are automatically approved for those who owe under $10K, and have not had a previous plan in the past 5 years.

Boston is correct that no one, including the IRS, can levy 100% of your wages.

Answer 7

I had the same problem , I called them , you may have to go thrue alot of peaple but that one person will help you with a payment plan and as long as you make your payments they will leave you alone, the irs is a lot nicer to deal with than peaple think,these days, tell them 50.00 a week and they will take the payment and they will deducte out of your payroll till payed for

Answer 8

You should go to your nearest IRS office and talk to an agent, in person.
This doesn't sound right.
They will work out a payment schedule, not take an entire paycheck.

Answer 9

If you contact the IRS, they may be willing to negotiate the rate of payment. Try it, can't hurt! Good luck.

Answer 10

this seems like it is a little harsh. try another company or perhaps consult a tax lawyer. you will probably have to pay , but the thing is to try to settle for the lowest amount...with all of the problems today, the govt needs revenue