When you owe taxes, the Internal Revenue Service (IRS) can garnish your wages without even going to court and obtaining a garnishment order. This is in contrast to ordinary creditors, who must sue you, get a judgment against you, and then enforce the judgment though the remedy of wage garnishment.
How to Stop an IRS Wage Garnishment
Technically, the IRS does not do a wage garnishment. Rather, the IRS does a levy on your wages. The effect, though, is the same as a wage garnishment. The effect is that your employer receives the levy and upon receiving it your employer must start paying a percentage of your wages each pay period to the IRS in repayment of your back taxes that you owe. The IRS can do more than garnish your wages through a levy on your wages. If you don’t pay your taxes on time, the IRS can levy on any bank accounts you hold and take all of the money in your accounts (and it will), or place a lien against your home or other property, among other things.
IRS Levy Process
Any IRS levy on a person's wages or other assets is typically preceded by a Notice and Demand for Payment of tax that has been assessed for a particular tax year, which is typically followed by a Final Notice of Intent to Levy and Notice of Your Right to A Hearing. Usually, if you don’t pay your back taxes within 30 days of the final tax notice, the IRS will proceed without further notice to garnish your wages through a levy on your employer, as well as levying on your bank accounts.
Will Bankruptcy Stop IRS Garnishment?
Similar to an ordinary wage garnishment, filing bankruptcy will stop an IRS garnishment, that is, an IRS levy on your wages. With an IRS levy on your wages, though, your case may or may not eliminate the tax liability, depending on how old the tax debt is and how your taxes are treated in bankruptcy.
If the tax debt can be eliminated in bankruptcy, you simply stop paying the IRS tax debt and you’ll become debt free, free from the back taxes for good. This would be the ideal solution but may not always be an option available to you depending on your circumstances.
Even if the IRS tax debt cannot be eliminated in a Chapter 7 filing, you can still file a Chapter 13 bankruptcy and repay the back taxes over a 3-5 year period. Repayment over 3-5 years will usually be much better than having your wages garnished each pay period.