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Understanding IRS Wage Garnishment

06th October 2009
By Matt Robinson in Taxes
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What does it mean to have your wages garnished? Even if you don't know the exact meaning of this, one thing is for sure: you probably realize that it is a bad thing. Simply put, wage garnishment is the result of a court order in which money is deducted from an employee's regular paycheck. In the United States, even though wage garnishment is legal, no more than 25 percent of the income can be taken.

Wage garnishment is used in situations when a person is not paying a particular type of debt. This process is often times used to collect for taxes, child support, and/or student loans in default.

If you are worried about becoming a victim of wage garnishment this is not something that will just pop up out of nowhere. For instance, if you owe back taxes, there are several steps that the IRS must take before moving forward with this process.

1. Send a Notice and Demand for Payment.

2. The person must then refuse to pay the tax and ignore the notice.

3. Thirty days before the wage garnishment takes place the IRS must send one last notice known as a Final Notice of Intent to Levy and Notice of Your Right to A Hearing.

So if you receive a Notice and Demand for Payment you have two options. You can either comply and pay what you owe, or let the process unwind and eventually have the IRS proceed with wage garnishment.

Why would an employer listen to the IRS when asked to garnish the wages of an employee? The reason for this is simple: they don't want to get involved and in turn be held responsible for any damages. In turn, wage garnishment is added to the payroll process to ensure that the proper amount is deducted from each paycheck. Wage garnishments continue until the debt is paid off in its entirety, or you decide to make other arrangements.

Wage garnishment can have many negative effects on your personal life as well as your finances. For instance, wage garnishment will lower your credit score and subsequently make it difficult to obtain a loan. Additionally, financial institutions are less likely to offer you a bank account if your wages have been garnished in the past. And of course, this can cause a lot of harm to your reputation within your company.

IRS wage garnishment is a serious issue, and it should not be taken lightly. If the IRS ends up using a wage levy against you to collect there are many ways to stop it. It is best to talk with a tax relief professional to come up with the best solution for your unique tax and financial situation.
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