How to Stop an IRS Wage Garnishment

Your paycheck came in light. Payroll handed you a stack of IRS paperwork. The number on the stub that says “levy” is bigger than your car payment.

Here is the first thing to understand. An IRS wage levy is not a one-time grab. Under IRC 6331(e), a levy on salary or wages is continuous from the date it is first made until it is released under section 6343. It does not run out after one check. It does not get bored. It keeps taking every payday until somebody makes it stop.

The good news is that the Code tells you exactly what makes it stop. This guide walks through the release grounds, the order I would tackle them in, and the mistakes that keep people levied for months longer than necessary.

What a wage levy is, in one paragraph

A levy is the IRS taking property to pay a tax debt. IRC 6331(a) lets the IRS levy on “all property and rights to property” of a person who neglects or refuses to pay within 10 days after notice and demand. For wages, the IRS serves a Form 668-W, Notice of Levy on Wages, Salary, and Other Income, on your employer. Your employer then pays the IRS everything above an exempt amount each pay period. That exempt amount comes from IRC 6334(d) and is published each year in Publication 1494.

Notice what is missing. There is no 25 percent cap. The federal wage garnishment limits in the Consumer Credit Protection Act do not apply to “any debt due for any State or Federal tax.” That is 15 U.S.C. 1673(b)(1)(C). This is why a federal tax levy feels so much harsher than a credit card garnishment. It is.

The five situations where the IRS must release a levy

IRC 6343(a)(1) says the IRS “shall release” a levy if any one of these is true:

The liability is satisfied or the collection period has run out. Pay it in full, or the 10-year collection statute expires.
Release will facilitate collection. For example, releasing the levy lets you borrow or sell something to pay the debt.
You entered into an installment agreement under IRC 6159, unless the agreement says the levy stays.
The levy is creating an economic hardship because of your financial condition.
The value of the levied property exceeds the debt and part of it can be released without hurting collection.

There is one more, specific to wages. IRC 6343(e) says that when the IRS agrees with you that the tax is not collectible, it “shall release such levy as soon as practicable.” That is the Currently Not Collectible route.

The word that matters in all of this is “shall.” Release on these grounds is not a favor. It is the law. But the IRS does not go looking for reasons to release your levy. You have to show up with the reason and the paperwork to back it.

Step one: make sure your exempt amount is right

Before you negotiate anything, look at what your employer is actually sending. The levy comes with a Statement of Dependents and Filing Status. According to IRM 5.11.5.4.1, your employer gives you that statement to complete and return within three days. If it is not returned, the exempt amount is figured as if you were married filing separately with no dependents.

That default is the smallest exempt amount the table allows. A married parent of three who ignores the form gets treated like a single person with no kids. The fix costs nothing. Fill out the statement. If you missed the deadline, the same IRM section says you can give the statement to your employer later to change the exempt amount.

This will not stop the levy. It can put a few hundred dollars per paycheck back in your pocket while you work on stopping it. Run your numbers through the exempt amount calculator.

Step two: pick the release ground that fits your life

Most people I talk to fit one of three patterns.

You can afford a monthly payment

If your budget can carry a payment, an installment agreement is usually the cleanest path. IRC 6343(a)(1)(C) requires release once you have entered into one, unless the agreement says otherwise. The IRS will want your returns filed and your current-year withholding or estimates in order first. See using an installment agreement to release a wage levy.

You cannot pay your basic living expenses

If the levy leaves you unable to cover rent, food, utilities, medical costs and transportation, you have an economic hardship claim. Treasury Regulation 301.6343-1(b)(4) defines it as being “unable to pay his or her reasonable basic living expenses.” The IRS will want a financial statement. Read economic hardship release before you call.

You are somewhere in between

Sometimes the full levy is a hardship but a smaller one is not. The IRS can release part of the levy with Form 668-D so that a fixed amount goes to the IRS and the rest comes to you. That is a partial release.

Step three: get your filing in order

An installment agreement requires filing compliance. IRM 5.14.5.2 is explicit that individual taxpayers must file all required returns and be current with withholding or estimated tax payments before an agreement is granted. If you have unfiled returns, start on them now.

Hardship is different. IRM 5.11.2.3.1.4 tells IRS employees not to condition hardship relief on getting delinquent returns. Those are separate issues. You still need to file. You just should not be told to wait months for relief from a levy that is leaving you unable to eat while you do.

Step four: make the call, and ask for the release in writing

Call the number on the levy or on your most recent IRS notice. If a revenue officer is assigned, call the revenue officer. Have your financial information ready. When the IRS agrees to release, the release goes to your employer on Form 668-D. IRM 5.11.2.3.3 allows the IRS to fax a release when speed matters, if the employer will accept it that way.

Timing matters because of payroll. The IRM’s own example says that once hardship is shown, the IRS should release the levy immediately “so the employer will not send a levy payment on the next pay day.” Your employer cannot stop on your word. It needs the release.

If the IRS says no

You have appeal rights. The Collection Appeals Program covers levies that have been or will be taken, and IRM 5.1.9.4.2 says there is no deadline for requesting a CAP appeal in most situations. If you are still inside the window from your final notice, a Collection Due Process hearing may be available, and it comes with Tax Court review.

Mistakes that keep people levied

Waiting. Every payday you wait is another check gone. Money already paid over is hard to get back.
Quitting the job. Some people quit to starve the levy. Then they have no income and the debt is still there, still growing with penalties and interest. That is not a strategy. That is a different problem.
Ignoring the statement. The default exempt amount is the lowest one.
Calling without numbers. Every release ground except full payment turns on your finances. Show up with pay stubs, bills and bank statements.

For a broader overview of how my firm approaches wage garnishment, see wage garnishment help at GetIRSHelp.com.

The levy is continuous. So is your right to ask for release. Use it.

Frequently asked questions

Does an IRS wage levy stop after one paycheck?

No. Under IRC 6331(e), a levy on salary or wages is continuous from the date it is first made until it is released under IRC 6343. It attaches to every paycheck until then.

Is the IRS limited to 25 percent of my wages?

No. The Consumer Credit Protection Act limits do not apply to any debt due for any State or Federal tax, under 15 U.S.C. 1673(b)(1)(C). The IRS takes everything above the exempt amount set by IRC 6334(d) and Publication 1494.

What is the fastest way to get a wage levy released?

It depends on your finances. Full payment always works. If you can afford a payment, an installment agreement requires release under IRC 6343(a)(1)(C). If the levy leaves you unable to pay basic living expenses, an economic hardship release under IRC 6343(a)(1)(D) is required once the IRS confirms the hardship.

Can my employer stop the levy if I ask?

No. Your employer must honor the levy until it receives a release, usually on Form 668-D. An employer that refuses to honor a levy can become personally liable under IRC 6332(d).

Do I need to file my missing tax returns first?

For an installment agreement, yes; the IRS requires filing compliance. For an economic hardship release, IRM 5.11.2.3.1.4 tells IRS employees not to condition hardship relief on receiving delinquent returns, though you still need to file them.