Nothing induces a cold sweat like a letter from the IRS: “You still have not paid the amount you owe. . . . placing a levy on your bank accounts, wages . . . seizing and selling your property . . . Pay the amount you owe, now. Sincerely, The Tax Man”
The federal government gives you three chances to pay back taxes, interest and penalties. If you dismiss the warnings, then you get hit with a levy. Without a court order, the IRS can seize your possessions, take your social security benefits and tap into your wages. Once you’ve been trapped by an IRS garnishment, take one of these actions to reclaim your paycheck.
1. Write a Check
The simplest way to stop the IRS from dipping into your wages is to pay what you owe. You can sell assets, refinance your home or borrow from relatives. Of course, if you had access to the money, you probably would not have ignored their “Notice and Demand for Payment” and “Final Notice of Intent to Levy” letters.
2. Enter a Payment Plan
If you can’t afford to pay your past-due taxes in one lump sum, you may be able to negotiate an installment payment plan. This agreement lets you make monthly payments for up to three years. At the end of this time, you will have paid off the tax debt, interest and penalties. With this arrangement, if you haven’t defaulted on a tax payment plan before, the federal investigator will stop your salary garnishment and return your account to good standing.
3. Propose an Alternative Sum
If you’ve heard of people settling their tax debt for pennies on the dollar, this is the method they used: When you file for an “Offer in Compromise,” you are letting the IRS know that (a) you do not have all the money to pay your federal taxes, (b) you will not have that money over the next few years and (c) you want to pay a certain amount today and have your record cleared. Auditors accept very few offers in compromise. But if you qualify for the program, a good tax defense expert can help you with the paperwork.
4. Prove a Financial Hardship
The federal tax code dictates how much a taxpayer must be allowed to keep in order to pay living expenses. If your pay stubs and financial records show that you fall under this guideline amount, you may qualify for a financial hardship. Then, the IRS will stop the wage seizure until your financial health improves.
5. Declare Bankruptcy
As with other creditors, the IRS must stop collection efforts once you petition for a bankruptcy judgment. The agency can no longer garnish your wages or harass you about back taxes. The debt, however, does not automatically go away. It may come back after a Chapter 7 bankruptcy or may be wrapped up in a repayment plan with a Chapter 13 bankruptcy.
6. Hide Out
If all else fails, you can always move to a different city and change jobs. You can hope that Uncle Sam does not catch up with you, but make sure you put together a good defense. You can run, but you can’t hide forever. Avoid the hassle and talk with a tax network specialist instead.
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About the author: Mary Sutton is a Senior Writer for Fertile Content and a frequent guest contributor to many blogsGoogle+