What You Can Do for the Release of an IRS Wage Levy

On: April 5, 2023

Why did I receive a Notice of Intent to Levy and Notice of Right to a Hearing? The basic reason for receiving a Notice of Intent to Levy is because past due income tax returns have not been filed, or past due taxes have not been paid in full. The Internal Revenue Service under the authority of Internal Revenue Code (IRC) 6331 authorizes levies to collect delinquent federal income taxes. Any property or right to property that belongs to the taxpayer or on which there is a Federal tax lien can be levied, unless the IRC exempts the property from levy.

How much of my paycheck can the IRS collect?  A wage levy is the legal process where the IRS makes a legal claim against your wages or salary and the money seized will be applied to your tax debt. The IRS can take 25% to 50% of your disposable income each paycheck. If the wage levy places the taxpayer into an economic hardship the taxpayer can submit a request to release the wage levy as an exemption. The taxpayer’s employer can be notified that there should have been an exemption for back court ordered child support for example.

Can the wage levy be removed? The IRS wage levy can also be withdrawn by the IRS meaning that the IRS will take action to remove the levy from public records. In a wage levy, part of your wages will be sent to the IRS each pay period until you make other arrangements to pay your overdue taxes, the amount of overdue taxes you owe is paid in full, or the levy is released. Part of the taxpayer’s wages may be exempt from the wage levy and that exempt amount will be paid to the taxpayer. The employer will receive documents from the IRS to determine the amount to be calculated for the wage levy each pay period. The employer will provide the taxpayer with a statement of dependents and filing status to complete and return within three days regarding the exempt amount. If the taxpayer does not return the statement in three days, the exempt amount is figured as if you are married filing separately with no dependents.

What actions must the IRS take before a wage levy is issued?  The IRS will usually levy only after four requirements have been met. The first requirement is the IRS assessed the tax and sent the taxpayer a Notice of Demand for Payment. The second requirement is the taxpayer either neglected or refused to pay the taxes. The third requirement the IRS sent a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing at least 30 days before the levy was issued.  The fourth requirement is the IRS sent you an advance notification of Third-Party Contact notifying the taxpayer the IRS may contact third parties regarding the determination of the tax liability.

What if I have other income outside my job? If you have other income outside of your employer, the IRS may allocate the exemptions to the other income source and levy 100% of the income from a particular employer. In cases where the taxpayer has a child support obligation, and the employer did not include the child support in the exempt amount, the taxpayer should contact the IRS at the phone number on the IRS Levy Form 668-W to release this portion of the wage levy to allow the taxpayer to pay court ordered child support payments the court ordered prior to the wage levy being received by the employer.

Can a wage levy be taken against my bonus? In the case of an expected bonus at work, the IRS would receive the entire amount of the bonus under the wage levy and it would not be released. The salary or wages includes compensation for services paid in the form of fees, commissions, bonuses and other similar items. The bonus would not be exempt from the wage levy, and it would appear on your pay statement for that pay period. Employers are required to follow the IRS collection process when dealing with the wage levy and also the release of the wage levy.

What other factors can be considered for release of a wage levy? The Internal Revenue Service will consider if you already paid the amount you owe, the period of collection ended prior to the levy being issued, releasing the levy will improve your ability to pay your taxes, you have entered into an installment agreement and the terms of this agreement do not allow for the levy to continue, the levy creates an economic hardship for you preventing you from being able to meet basic and reasonable living expenses, or the value of property is more than the amount owed and releasing the levy will not hinder the IRS ability to collect the amount owed