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How much of your paycheck can the IRS levy or garnish?

On Behalf of | Feb 20, 2020 | Tax Debt

When a private business brings a lawsuit against someone who has failed to pay a debt, the courts may rule in their favor and order a garnishment of that individual’s wages. When the Internal Revenue Service (IRS) does the same thing to recover unpaid tax balances, they do not refer to such actions as a garnishment but rather as a levy of the wages of the individual who failed to pay taxes.

Regardless of the exact terminology used, when a third party comes in between you and a portion of your paycheck, it can have financially devastating consequences for your household’s budget. Many factors influence how much of your income the IRS can successfully levy to collect on unpaid taxes.

Familiarizing yourself with the IRS’s policies on levies and their permitted wage exemptions can help you respond more appropriately to alleged tax debts and any attempts to levy your wages.

The size of your family and amount of income you make determines the levy

Your filing status and the number of dependents that you claim on your taxes will guide the IRS in determining how much of your daily, weekly, bi-weekly or monthly income is subject to a levy as well as how much is exempt.

For individuals filing as a single person without dependents, their daily exempted pay is $47.69. The IRS then adds $16.54 to the exemption for each dependent the individual claims on their taxes. For individuals who file as the head of a household with no dependents, their personal exemption will be $71.73, with the same $16.54 allocated daily per dependent.

The personal exemption for an individual filing as married with a joint return, as well as certain qualifying widows or widowers, is $95.38. A married taxpayer filing a separate return has the same exemptions as an individual filing as a single person.

You must act quickly in a levy situation

If the IRS has decided to levy your wages in order to collect your past due taxes, your employer will receive documentation which they must execute in part. There will likely be other forms you must complete regarding your tax filing status and the number of dependents you claim. You must return these documents to your employer within three days or risk the generic classification of an individual who is married, filing separately with no dependents.

Depending on the total amount you make each day, a substantial portion of your total wages could wind up levied by the IRS to recoup your tax debt. Only those with extremely low daily income or exceptionally large families will likely be able to avoid any levies. However, for those facing such aggressive collection tactics as a levy against their wages, a more proactive response to the IRS may be necessary to avoid the financial hardship that could result from a diminished household income.