June 10, 2017

Denver Tax Attorney   How Much Can the IRS Levy From My Paycheck?Many people wonder about how much money the IRS can take from their wages if the IRS opts to issue a wage garnishment.

The reality, however, is that the IRS does not take a specific percentage from an individual’s income. The IRS actually adheres to a set of levy exemptions enumerated in the tax code. Such exemptions can be considered as protections, which the IRS cannot take from you. This means that instead of taking a specific amount from a person’s income, the IRS takes as much as it is allowed to—leaving only the amount exempt from the levy.

It is important to note that the IRS doesn’t simply take a person’s income or wages from the taxpayer’s bank account. The IRS sends a letter to the individual’s employer, requesting the employer to give the employee’s non-exempt amount to the IRS. The employer must comply, or otherwise risk being held personally liable for the amount that should have been recovered by the levy, plus 50 percent penalty.

The total amount of income exempt from levy depends on several factors. These include the taxpayer’s filing status, the pay frequency, and the number of claimed exemptions. Other factors include the taxpayer’s age and his or her ability to see, as additional exempt amounts exist if the taxpayer is over 65 years of age and/or is blind. Also exempted from an IRS levy is the amount of money needed to pay a support obligation ordered by the court, as well as specific sources of income such as Workers Compensation and Unemployment benefits.

Not exempt from an IRS levy are Social Security benefits, Survivors, Federal Old-Age, and Disability Insurance Benefits. The IRS levies 15 percent through the Federal Payment Levy Program, irrespective of the amount left for the taxpayer.

The taxpayer’s employer should be able to provide a Statement of Exemptions and Filing Status, which the taxpayer should complete and return within three days. If he or she fails to return this statement within three days’ time, the exempt amount will be computed as if the taxpayer were married filing separately with one exemption.

If a taxpayer has multiple income sources, then only a single source of income will be allowed the exempt amount. All other income sources will be levied by the IRS. When it comes to wage levies, the IRS considers bonuses, commissions, fees, and other similar items as an individual’s wages or salary.

In scenarios where joint tax liabilities exist, the IRS is generally instructed to levy the income of the spouse with the larger income. The IRS is only to levy the incomes of both spouses in cases where there is deliberate neglect or refusal to pay.

If you have a wage levy or are currently determining options for your IRS problem, it is crucial to understand the protections you have against the IRS levying your property. Consult with an experienced tax attorney as soon as possible.

Categories: IRS