This fact sheet provides general information concerning the CCPA’s limits on the amount that employers may withhold from a person’s earnings in response to a garnishment order, and the CCPA’s protection from termination because of garnishment for any single debt.
A wage garnishment is any legal or equitable procedure through which some portion of a person’s earnings is required to be withheld for the payment of a debt. Most garnishments are made by court order. Other types of legal or equitable procedures for garnishment include IRS or state tax collection agency levies for unpaid taxes and federal agency administrative garnishments for non-tax debts owed to the federal government.
Voluntary wage assignments are not included in wage garnishments. This is when an employee agrees on their own that their employer can give a certain amount of their pay to a creditor or creditors.
Having the IRS garnish your wages can be a stressful and confusing experience Many people wonder just how much the IRS can take from each paycheck, The answer depends on your personal financial situation, Let’s break down exactly how IRS wage garnishments work and how much the IRS can legally take from your pay
What Triggers an IRS Wage Garnishment?
The IRS won’t just suddenly start taking money from your paycheck out of the blue. There is a process they must follow first:
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You owe back taxes that you have not paid. This tax debt must be definitively assessed, not just estimated.
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The IRS sends you notices demanding payment, These include Notice of Intent to Levy and Notice of Your Right to a Hearing,
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You do not pay the amount owed or make payment arrangements Ignoring the IRS notices is what allows them to move forward with garnishment
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The IRS files a levy with your employer, requiring them to withhold part of your pay and send it to the IRS.
In short, you risk having your wages taken away if you owe back taxes, don’t respond to IRS notices, and don’t do anything to settle the debt.
How Much Can the IRS Legally Garnish?
The IRS does not garnish a flat percentage of your paycheck. They use something called the Federal Tax Levy Table to calculate how much they can take. This table sets out exempt income amounts based on:
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Your filing status – single, married filing jointly, etc.
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Your pay period – weekly, biweekly, monthly, etc.
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Your number of dependents
Your “exempt income” is the amount the IRS cannot take from your paycheck. They can garnish any wages above that exempt amount.
For example:
- You are single with no dependents
- Paid biweekly
- Exempt income is $382.50 per pay period
- You earn $1,000 biweekly
The IRS can take $617.50 from each paycheck ($1,000 – $382.50).
The more dependents you have, the higher your exempt income will be.
IRS Garnishment vs. Other Creditors
When comparing IRS garnishment to garnishment by other creditors, there are some key differences:
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Your wages can be taken by the IRS without a court order. Private creditors usually do.
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The IRS is not limited to garnishing 25% of your disposable earnings like other creditors. They use the Federal Tax Levy Table which often allows them to take more.
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IRS garnishment takes precedence over other creditors. Your employer must pay the IRS first before paying other creditors.
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When the IRS wants to take money from people’s paychecks, they have to follow these steps: Most creditors need to get a judgment first.
So in short, the IRS has more power to take money from your paycheck than other creditors.
How Long Does an IRS Wage Garnishment Last?
An IRS garnishment will continue indefinitely until:
- Your tax debt is paid in full
- You enter into a payment agreement like an installment plan
- You successfully appeal the levy
- The 10 year collection statute of limitations runs out
The garnishment does not automatically stop after a certain time period or percentage of the debt being paid. You must take action to resolve the debt or dispute the amount owed to stop the garnishment.
5 Ways to Prevent IRS Wage Garnishment
Here are some proactive steps you can take to avoid having your wages garnished by the IRS:
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Pay your tax debt – If you pay in full, you can avoid garnishment altogether. Even paying part of what you owe can help.
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Request an installment agreement – Set up a monthly payment plan with the IRS to pay your debt over time. This will stop a garnishment.
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Try to get an Offer in Compromise. If you can afford it, you might be able to settle your tax debt for less than the full amount.
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Claim financial hardship – The IRS may temporarily delay collections if you have extenuating circumstances.
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Appeal the levy – You can formally dispute the proposed levy and request a Collection Due Process hearing.
Acting quickly and communicating with the IRS are key to avoiding wage garnishment. Don’t ignore the issue and hope it goes away.
Can the IRS Garnish Everything?
The IRS can garnish your regular wages, bonuses, commissions, and other income like freelance payments or side jobs. Basically anything that your employer pays you is fair game for levy.
Some specific sources the IRS can’t garnish include:
- Social Security benefits
- Pension income
- Retirement account distributions
But they can levy up to 15% of any other federal payments you receive, like tax refunds.
They can also garnish your bank accounts in addition to wage levies. So it’s important to stay compliant with your taxes and not let debt pile up.
Getting Help Dealing with IRS Garnishment
If you receive an IRS notice of intent to levy, don’t panic. You still have options to avoid wage garnishment or minimize the financial impact. Consider getting help from a tax professional who commonly deals with IRS issues. They can walk you through the process and represent you in dealing with the IRS.
The key is taking action right away. By understanding how much the IRS can legally garnish and taking proactive steps to resolve your tax debt, you can get back on track and avoid losing a chunk of each paycheck. Don’t wait for the levy to start before you take control of the situation. Be strategic from the beginning.
Exceptions to Limitations on Wage Garnishments
The wage garnishment law specifies that its limitations on the amount of earnings that may be garnished do not apply to certain bankruptcy court orders, or to debts due for federal or state taxes.
If a state wage garnishment law differs from the wage garnishment provisions of the CCPA, the law resulting in the lower amount of earnings being garnished must be observed.
Limitations on the Amount of Earnings that may be Garnished (General)
The amount of pay subject to garnishment is based on an employee’s “disposable earnings,” which is the amount of earnings left after legally required deductions are made. Examples of such deductions include federal, state, and local taxes, and the employee’s share of Social Security, Medicare and State Unemployment Insurance tax. It also includes withholdings for employee retirement systems required by law.
When figuring out disposable earnings under the CCPA, deductions that aren’t required by law can’t usually be taken out of gross earnings. These include payments for voluntary wage assignments, union dues, health and life insurance, donations to charities, buying savings bonds, retirement plan contributions (except those required by law), and payments to employers for payroll advances or purchases of goods.
The wage garnishment provisions of the CCPA set the maximum amount that may be garnished in any workweek or pay period, regardless of the number of garnishment orders received by the employer. For ordinary garnishments (i. e. If an employee’s disposable income is less than or equal to three times the federal minimum wage (currently $7.25), the weekly amount cannot be more than the lower of two numbers: 25% of the employee’s disposable income; or the amount by which the employee’s disposable income is greater than 70% of the federal minimum wage. 25 an hour).
Therefore, if the pay period is weekly and disposable earnings are $217. 50 ($7. 25 × 30) or less, there can be no garnishment. If disposable earnings are more than $217. 50 but less than $290 ($7. 25 × 40), the amount above $217. 50 can be garnished. If disposable earnings are $290 or more, a maximum of 25% can be garnished. When pay periods last longer than one week, the most that can be taken out must be found by multiplying the weekly limits by the number of weeks. The table and examples at the end of this fact sheet illustrate these amounts.
| Weekly | Biweekly | Semimonthly | Monthly |
|---|---|---|---|
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$217.50 or less: NONE |
$435.00 or less: NONE |
$471.25 or less: NONE |
$942.50 or less: NONE |
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More than $217.50 but less than $290.00: Amount ABOVE $217.50 |
More than $435.00 but less than $580.00: Amount ABOVE $435.00 |
More than $471.25 but less than $628.33: Amount ABOVE $471.25 |
More than $942.50 but less than $1256.66: Amount ABOVE $942.50 |
|
$290.00 or more: MAXIMUM 25% |
$580.00 or more: MAXIMUM 25% |
$628.33 or more: MAXIMUM 25% |
$1256.66 or more: MAXIMUM 25% |
As discussed below, these limitations do not apply to certain bankruptcy court orders, or to garnishments to recover debts due for state or federal taxes, and different limitations apply to garnishments pursuant to court orders for child support or alimony.
IRS Wage Garnishment: How Much Can the IRS Take? What Should You Do?
FAQ
Is there a limit to how much the IRS can garnish your wages?
Generally, the IRS will take 25 to 50% of your disposable income. Disposable income is the amount left after legally required deductions such as taxes and Social Security (FICA). You should also be aware that if you’re paid as a 1099 contractor, the IRS can sometimes take the entire amount.
What is the most they can garnish from your paycheck?
Federal law limits wage garnishments to 25% of your disposable income (15% for federal student loans) or the amount exceeding 30 times the federal minimum wage, whichever is less.
How much can IRS take from my paycheck?
There is no set limit in federal law on how much the IRS can take out of your paycheck every month.
How much will the IRS usually settle for?
“How much does the IRS usually agree to settle for?” The short answer is that they usually agree to whatever amount a taxpayer can pay back.