Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses levies and garnishments, including which assets the IRS can seize and how the IRS can garnish your wages.
A levy is a legal seizure against your assets that results from owing back taxes. The IRS can seize just about anything you own, including property, bank accounts, retirement accounts, some life insurance policies, and even wages. How much of your wages the IRS levies depends on a few factors, such as your filing status, the number of dependents you claim, and how often you receive a paycheck.
Unfortunately, the IRS has full discretion on how much of your paycheck they will garnish. However, the IRS can typically only garnish your disposable income each month over the exempt amount according to your standard deduction. For example, single filers have a standard deduction of $13,850 in 2023. If a single filer with no dependents gets paid weekly, their take home pay after the wage garnishment would be about $266 ($13,850 divided by 52 weeks). If you have dependents, or use a higher standard deduction, this amount will increase.
Most taxpayers who have levies just want to know how to get them removed. The simplest and most obvious answer is to pay the tax liability in full. If this isn’t an option, the next best thing to do is to set up an installment agreement with the IRS or try to claim economic hardship. Whatever your next move is, taking swift action is crucial and having a team of tax professionals in your corner can help ease the process.
Don’t miss next week’s episode where Phil will discuss tax scams. See you next Friday!
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