While it's unhealthy to maintain a state of constant paranoia when it comes to the IRS, there are times for legitimate concern. The good news is that you likely know if you have reason to worry. Unread IRS notices, neglecting requests for action and tax avoidance are all real problems that can precipitate very real and unwanted collection action.
A practical problem that faces many wayward taxpayers is IRS intervention following an unpaid tax debt. After an obligatory opportunity to allow you to resolve an outstanding liability - and a flurry or IRS notices - you may find yourself with a wage garnishment. You may think that this couldn't happen to you, but failing to address a tax debt can end quite literally with a chokehold on your paychecks.
What Happens to Your Wages
First, it's important to understand what a wage garnishment is. Much like a bank levy, a levy against your wages is designed to offset your income to satisfy a delinquent tax balance. And, much like a drain on your checking or savings account, the IRS typically reserves wage garnishments for cases of prolonged failure to handle a tax debt.
Your employer will be notified that a portion of your wages are to be withheld from your paychecks and paid to offset your liability. So, in addition to the practical concern of having a diminished income, you have the added embarrassment of having your IRS issue made known to your employer. This wage garnishment will be applied to every paycheck you receive until the full tax balance is satisfied. If you're a contract worker, your employer can be instructed to hand over 100% of your wages.
Fortunately, the IRS vice grip on your income doesn't have to become a permanent measure. As with most tax-related issues, the expectation is for you to take action. With that in mind, you can be reasonably assured that establishing a formal resolution to your tax issue will free up your paychecks. But what does this entail, exactly?
Think back to when you received your first notice of assessment and you either didn't have the money or the desire to address it. The space in between that moment and the time you're fighting for your wages was for you to come to some arrangement to pay your tax balance, though not necessarily all at once. And even after your earnings are being seized, the potential for resolution still rests in your hands.
A formal resolution may involve an installment agreement, which enables you to pay your tax debt over an extended period of time. The terms of this agreement will likely be more amenable than those enforced on your wages. In order to realize the best possible circumstances when it comes to a payment arrangement or other potential resolution, you may wish to enlist the services of a licensed tax professional. Such an individual can work not only to get your wage garnishment lifted, but he or she can establish a formal, legal resolution which prevents you from worrying about future wage encroachments.