If you owe back taxes, the IRS may institute a wage garnishment to collect the debt, forcing your employer to send a portion of your paycheck to the government. Facing an IRS wage garnishment in California can feel daunting and leave you unable to manage financially.
The IRS estimates that enforcement efforts, such as wage garnishments, accounted for up to $63 billion in recovery revenue in 2021. Luckily, there are actions you can take to address and potentially eliminate this financial burden.
Respond to IRS notices
In California, the IRS can garnish up to 25% of your gross income. Therefore, it is important to respond promptly to any IRS notices regarding your tax debt. Ignoring these notices can escalate the situation. The IRS typically sends several warnings before resorting to wage garnishment as a last step.
Explore payment options
The IRS offers various payment options that may help you avoid wage garnishment, such as an installment agreement that allows you to pay your tax debt in manageable monthly increments. The IRS may also consider an offer in compromise, where you negotiate to settle your debt for a lower amount in a single payment.
Claim financial hardship
If paying your tax debt would create financial hardship, you may qualify for the Currently Not Collectible (CNC) status. This temporarily halts IRS collection activities, including wage garnishment, because you do not make enough to pay. You must provide periodic updates and proof of your ongoing situation.
Consider seeking guidance from a tax professional, such as a CPA, who can help you navigate the complexities of the tax system. A CPA may also spot any misinformation within a tax notice that might lead to a reduction or elimination of the debt.
Taking proactive steps and exploring available options can help you regain control of your finances and work towards a resolution with the IRS.