How to Stop IRS Wage Garnishment

When the IRS garnishes your wages, it takes a portion of your paycheck each pay period to recover the tax debt you owe. The amount garnished depends on your earnings, tax filing status, number of dependents, and type of debt, but it could be up to 60% of your disposable earnings.

Fortunately, the IRS can’t garnish your wages without notifying you first. If they’ve informed you of a future wage garnishment, here are some steps you can take to stop it.

How does IRS wage garnishment work?

The IRS can garnish your wages if you have an overdue tax bill, but there’s a process it must follow first. Here are the three letters it will send out before moving forward. 

• An initial notice requesting payment
• An intent to levy or garnish your wages (30 days beforehand)
• A notice that lets you know you can have a hearing to dispute what you owe if you believe it’s incorrect (30 days beforehand)

If you don’t pay or reply to the notices, the IRS will contact your employer by mail and explain how to calculate your total garnishment and when it will start—usually your next pay period. Besides a portion of your regular paycheck, the IRS can take bonuses, commissions, fees, pension payments, and other earnings to settle your debt. 

It can take as long as six months from receiving the first letter from the IRS until your wages are garnished. But you don’t need to wait to take action; acting early can help minimize your stress and stop the garnishment.

Ask the expert: What should you do first if you receive a wage garnishment notice from the IRS?

Erin Kinkade

CFP®

I recommend first verifying it is a legitimate debt notice by contacting the IRS (be sure to respond quickly to the IRS and document everything). Once you confirm the debt owed, discuss your repayment options. If you’re unsure which option is best, talk to a tax professional and/or attorney.

6 ways to stop wage garnishment

Most strategies for stopping wage garnishment involve working with the IRS to settle your back taxes, but you could also prevent wage garnishment if you prove that you can’t pay what you owe.

Option	Best for
Pay off your tax debt in full	Individuals with enough savings or assets to pay the full amount owed immediately.
Set up a payment plan	Individuals who will have enough savings or assets to repay their tax debt over time.
Offer in compromise	Individuals comfortable with negotiation and seeking to settle their tax debt.
Declare hardship	Individuals struggling with a temporary financial setback.
Declare bankruptcy	Individuals in dire financial circumstances with no other options.
Work with a tax professional	Individuals who need expert help with complicated tax situations.

1) Pay off your tax debt in full

The first way to stop wage garnishment is to pay your tax debt. If you pay the IRS, it won’t have a reason to take a portion of your paycheck.

How to pay off your debt quickly

If it’s an option, consider dipping into your savings to pay off your tax debt. This is generally the fastest and best way to stop wage garnishment. You can also use a personal loan or make a credit card payment through a third-party service to repay your tax debt.  

Alternatively, you can let the IRS continue to garnish your wages until it takes the full tax debt you owe. Once the IRS takes enough, it will stop. But if you go this route, interest and penalties can still add up, so making a lump-sum payment is typically cheaper.

What to do after paying your tax debt in full

Get confirmation from the IRS immediately after paying your tax debt in full. You can also take steps in the future to reduce your tax burden, such as regularly contributing to a 401(k) account or a favorite charity. 

2) Set up a payment plan

The IRS is often willing to work with people who owe a tax debt. If you’re not paying your tax bill because you can’t afford it all at once, contact the IRS to set up a payment plan.

Types of payment plans available

Depending on your debt, you can set up a short-term or long-term payment plan for a small fee. These plans give you up to six years to repay your debt, turning a hefty one-time payment into a more affordable monthly one.

As long as you stay up to date on your payment plan, the IRS won’t garnish your wages.

How to apply for a payment plan

You can apply for a payment plan on the IRS website, and the process takes just a few minutes. You’ll need to verify your identity and share your banking information for the payment plan. The IRS will also ask for personal information, including your:

• Address
• Email
• Birthdate
• Tax filing status
• Social Security number or Individual Tax Identification Number (ITIN)

If you think this is the right strategy for you, check out our guide on how to set up an IRS payment plan.

What to expect after applying

After you apply for a payment plan, the IRS will let you know right away if you’re approved. If you qualify, you can then access your payment plan information via the IRS website. If you don’t, you can call the IRS at 800-829-1040 to talk through your options.

3) Negotiate an offer in compromise

If you meet certain eligibility criteria, you might be able to negotiate an offer in compromise with the IRS to stop wage garnishment. 

What is an offer in compromise?

Offers in compromise involve settling your debt for less than the full amount you owe. For example, if you owe $10,000 in tax debt, you might convince the IRS to accept a payment of $7,000 and to forgive the remaining $3,000 balance.

Eligibility criteria 

You might be eligible for an offer in compromise if:

• You’ve filed all your tax returns
• You’ve made any required estimated payments
• You haven’t filed for bankruptcy
• You’ve been approved for a tax extension

How to make an offer in compromise

To make an offer in compromise, you’ll submit a few forms to the IRS and pay a fee. You must also include a down payment of at least 20% of the amount you’re offering to pay. So if you offered to pay $7,000 to settle a $10,000 debt, you’ll need to include $1,400 with the application.

Remember, offers in compromise aren’t guaranteed to work. The IRS rejects almost two-thirds of applications. You must prove you can’t pay the full debt to qualify. For more information, check out our guide on offers in compromise.

4) Declare hardship

If wage garnishment is making it hard to pay bills, you might be able to get the IRS to stop garnishing your wages temporarily. Call the IRS on the phone to declare a financial hardship.

What qualifies as hardship?

The IRS defines financial hardship as being unable to “meet basic, reasonable living expenses.” So, if you’re struggling to pay your rent or mortgage or keep food on the table because your wages are being garnished, you could be eligible for financial hardship.

Hardship might stop wage garnishment, but it doesn’t release you from your tax debt. When you declare hardship, the IRS will want to work with you to set up a payment plan or another way to settle your balance.

How to prove financial hardship

You can’t just say you’re struggling financially because of a wage garnishment — you’ll need to prove it. Contact the IRS by phone, talk through your financial situation, and be prepared to share documents, such as bank statements and other information with them to show you’re struggling to make ends meet.

5) Declare bankruptcy

Tax debt is like other forms of debt. If you can’t pay what you owe, you have the option to declare bankruptcy. Bankruptcy lets you restructure or discharge your debts and start with a cleaner financial slate.

When to consider bankruptcy

You should only consider bankruptcy if you have no alternatives because it can have serious financial consequences. Depending on the type you file, bankruptcies can appear on your credit report for up to ten years and make it difficult to borrow money in the future. 

Still, bankruptcy is a suitable last resort for people in difficult financial situations. If you’ve exhausted all other options for repaying your debt and are struggling considerably, talk to a credit counselor about your options before filing.

How bankruptcy affects wage garnishment

If the IRS is garnishing your wages and you file for bankruptcy, it’s possible to stop the wage garnishment. To ensure things move forward, the IRS recommends that you:

• File your tax returns for tax periods ending within four years of your bankruptcy filing
• Continue to file and pay all taxes when they’re due
  • If you need an extension for current taxes, apply for one

If you follow these steps, you might be able to get your tax debt discharged during bankruptcy proceedings and stop the wage garnishment.

6) Work with a tax professional

Working with a tax professional could help alleviate your burden if you’re feeling overwhelmed by taxes and wage garnishment. 

Benefits of hiring a tax professional

• Tax professionals have experience working with the IRS.
• They have a deep understanding of tax law and options for handling tax debt. 
• They can provide personalized recommendations based on your unique financial situation.
• They can work directly with the IRS so you don’t have to. 

How to choose a qualified tax expert

Choosing a qualified tax professional might be easier than you think. Consider asking a trusted family member or friend for a recommendation, as many people work with tax experts each year at filing time. The IRS also has a helpful tool that you can use to find a tax pro with certain credentials.  

What to expect when working with a professional

If you decide to work with a tax pro, you’ll generally start with a free consultation and then follow up with an in-person or phone meeting. Depending on your situation, they may suggest a payment plan, negotiating an offer in compromise, or even declaring bankruptcy.

They’ll work with the IRS on your behalf, which can reduce the stress of dealing with tax debt and wage garnishment. Remember that help from a tax pro isn’t free; you’ll need to pay for their services.

If you’re considering working with a tax professional to deal with wage garnishment, check our guide to the best tax relief companies.

What happens if you don’t stop IRS wage garnishment?

By law, your employer can’t fire you if the IRS garnishes your wages once. But you could lose your job if you don’t address your financial issues, and the IRS garnishes your wages again. 

Even worse, the IRS could come after your other assets, such as your car, home, or retirement savings. If the IRS has notified you that they’re planning to garnish your wages, the above strategies could help get you back on track. 

FAQ

What is the most the IRS can garnish from your paycheck?

The amount the IRS can garnish varies depending on the type of debt and the jurisdiction. For consumer debts in the U.S., the maximum is 25% of your disposable earnings or the amount by which your weekly wages exceed 30 times the federal minimum wage, whichever is less. 

For child support and alimony, it can garnish up to 60% of disposable earnings, depending on whether you’re supporting another spouse or child. Federal student loans can lead to a garnishment of up to 15% of disposable earnings.

How can you stop wage garnishment after it starts?

To stop wage garnishment after it has started, you can negotiate a settlement or payment plan with the creditor, challenge the garnishment if it’s improperly executed, or file for bankruptcy, which can halt most garnishments. 

You may be able to claim exemptions that reduce or eliminate the garnishment amount or request a hearing to contest it, particularly if it’s causing undue financial hardship.

Can I quit my job to avoid wage garnishment?

We don’t recommend quitting your job to avoid wage garnishment. It doesn’t eliminate the debt and may lead to further legal actions, such as garnishing wages from a new job or freezing your bank account. It’s more beneficial to address the debt through negotiation, legal channels, or by seeking professional financial advice.