Many people who have the "luxury" of working with the United States Internal Revenue Service know all too well how much power it possesses compared to many other federal governmental agencies. One of those powers the American public is often fearful of involves wage garnishment. In the event that a taxpayer owes back taxes and cannot pay a tax obligation, the IRS has the authority to garnish that taxpayer's wages.
This is a route many private creditors can and do take to procure money owed to them. However, the IRS does not need to follow rules most lenders do. There is no need to jump through court procedures and obtain judgements. The IRS can also typically confiscate more money than a typical private lender can.
Despite such powers, there are options taxpayers can pursue in the event they are faced with such a scenario.
Options to avoid wage garnishment for unpaid taxes
- Payment plan: A taxpayer can work out a monthly payment plan with the agency to fulfill the debt. However, not all taxpayers are eligible. The amount owed, for instance, often determines whether the IRS will allow a payment agreement.
- Settlement offer: A taxpayer can also negotiate with the agency to settle on a much lesser amount than what is owed. This is known as an Offer in Compromise and is often referred to as an OIC. However, the IRS requires the taxpayer meet certain conditions before qualifying. It often requests bank statements and other heaps of financial documentation before approval.
- Bankruptcy: A taxpayer may also be able to discharge tax debt by filing for bankruptcy. This option is appealing to taxpayers who owe money to other creditors and do not have the means to pay the debt back. However, there are strict conditions, such as the "240 day rule," that must be met before this option is authorized.
Innocent spouse relief: A taxpayer who filed joint taxes with a former spouse may be released from the tax liability by filing for innocent spouse relief. This option is available if the ex-spouse was responsible for the tax debt due to a failure to report certain income or by claiming unlawful tax deductions.
IRS liens and asset confiscation
Along with wage garnishment, there are other avenues Uncle Sam can pursue to collect on back taxes. Seizing valuable assets, placing a lien on a taxpayer's real property and confiscating future tax returns are all possible options.
If you are facing wage garnishments or property liens from unpaid back taxes, contacting a tax attorney knowledgeable in this area to find options to help you is advised.