You may have heard about wage garnishments, tax liens, and IRS levies but have no idea what they are or how they work. Fortunately, you can stop them if you act fast enough. Wage garnishments are when the government takes your income to pay off a debt, like unpaid taxes or student loans. A tax lien is similar to wage garnishment in that it puts a claim on your property (in this case, real estate). And an IRS levy freezes your bank accounts until you pay up—but unlike wage garnishments, it doesn’t take money from your paycheck.
What is a Wage Garnishment, Lien, and Levy?
You may be wondering, “What is a wage garnishment, lien, and levy?”
These are all ways people and businesses can take money out of your paycheck. Here’s how they work:
Levy is a bit of a buzzword when it comes to taxes, but it’s not too hard to understand.
Basically, a levy is a legal process by which the IRS can get back the money you owe them. They can do this by taking money from your bank account or your wages—and if you don’t have sufficient money in your account, they can take other assets, like cars and houses.
- Wage Garnishment
Wage garnishment is a process by which the Internal Revenue Service (IRS) takes money from your paycheck to pay back taxes that you owe.
The IRS can use this method to collect outstanding tax debts from both individuals and businesses.
If you are subject to wage garnishment by the IRS, you will be notified by mail of the amount of your debt, the date that it was assessed, and the date that your wages will be garnished.
- Tax Lien
The IRS can put their claim on any property you own—including real estate and vehicles—to collect on unpaid taxes. They don’t have to go through a court process for you to get a tax lien. Instead, the IRS will record its notice of federal tax lien on your property records in your state automatically.
The Difference Between Garnishments, Liens, and Levies
The difference between garnishments and liens is that a garnishment is a court order that requires your employer/s to withhold a portion of your wages to pay back taxes. A lien is just a legal claim against your property, which prevents you from selling or refinancing it until the debt is paid.
Courts issue garnishments, and there’s no limit on how much money they can take from your paycheck; liens are filed by creditors or other entities and only affect specific assets (like real estate and cars).
How to Stop Wage Garnishments and Liens
- Pay your tax debt
If you owe back taxes, you must make every effort to pay off your debt. You can work with the IRS or your state revenue department to set up a payment plan or apply for an installment agreement. If you are unsure of the back taxes programs, tax debt relief firms are more than willing to extend their professional help and negotiate a plan that works for your tax situation.
To give you an idea in settling your back taxes, here are the common tax debt relief programs offered by the IRS:
- Installment Agreement
It is a way to make payments on your tax debt over time. The IRS will agree to an installment plan if it feels that you can pay back your debt within a reasonable time frame.
- Offer in Compromise
It’s a way to sort out your tax debt for less than you owe, but only if you meet specific criteria.
Offer up any assets or property that could be sold off to help pay off some of your debt. If there’s anything valuable in your home or car, consider selling it so that it can be used as collateral against any outstanding debts that may remain after negotiations with creditors have been completed successfully (if they even exist). The idea here is to reduce what needs paying off as much as possible before starting over fresh with new terms and conditions established by both parties involved in resolving their differences.
- File for bankruptcy: In some cases, filing for bankruptcy may be the only way to stop wage garnishments from going into effect. However, doing so will seriously affect your credit score and finances. Before filing for bankruptcy, consult a tax attorney who can help weigh the benefits against the potential drawbacks of starting over from scratch.
If you have a tax lien, the first step is to contact the IRS directly and ask for an installment agreement or any suitable tax debt relief program for your specific situation. This will allow you to eventually pay off your taxes in monthly installments rather than all at once. Think of this payment plan as an addition to your monthly bills to be settled. This way, you can organize your finances until you pay off your back taxes based on the negotiated number of months for it to be settled.
To remove a tax lien from your property and clear up your credit report as soon as possible, you must work with an attorney specializing in these types of cases (and who has experience associating with clients who are going through wage garnishments).
How to Stop IRS Levies
There are several ways to stop IRS levies. The best way is to hire a trusted tax debt relief attorney to file your appeal, but you can also do it yourself if you’re willing to put in the time and effort. If you plan on filing your own appeal, ensure you have all the right documents before starting (you’ll need proof that an employer owes taxes).
You can file a petition for a Collection Due Process Hearing or Appeal if the amount owed exceeds $50,000 or has been charged off by the IRS and/or State tax agency. You’ll need at least 60 days’ notice before doing this procedure so make sure that any notices given by mail are received within this timeframe.
The bottom line is that if the IRS wants your money, they’re going to come after you hard, hoping that you won’t fight back and if you can’t pay them all off at once, their long-term goal of keeping more of your income will kick in.
While it can be difficult to predict how the IRS will react once you owe that much, it is possible to get your financial life back on track. The best way to protect yourself is to act before they do, so before you know it, you’ll be able to sleep easy with a clear conscience.
It’s essential to get your taxes in order if you’re behind on payments because the IRS does not take kindly to having its authority ignored. If you don’t pay your taxes, the government has a few options for getting their money out of you.
I hope you are feeling more confident about your ability to handle your taxes. As someone who has struggled with this, I know it can be a horrifying situation. But don’t panic! The most important thing is to get started on the right foot. If you need help finding a tax debt relief agency, we are just one call away in giving you peace of mind and freedom against your stressful tax burden.