Inside the IRS Wage Levy Formula
When the IRS garnishes wages, its formula that doesn’t care about actual expenses, cost of living, or the fact that your client’s finances were already stretched thin.
Clients expect a percentage-based garnishment. Instead, the IRS calculates how much of their paycheck they’re “allowed” to keep — and takes every dollar above that.
Why This Matters to You
A wage garnishment is not just a tax event. It reshuffles your client’s entire financial circumstances.
Deals stall. Bankruptcy plans are ruined. Cash-flow tanks. Divorce budgets collapse and Retirement plans derail
Below are five key insights on how wage garnishments are calculated, paired with examples utilizing IRS guidelines.
THE FIVE POINTS
1. Exempt income is the starting point — and it’s shockingly low
Publication 1494 tells the employer how much money the taxpayer is allowed to keep each pay period.
The exempt amount depends on: Filing status • Number of dependents • Pay frequency • Limited age/blindness adjustments
The exempt amount is probably lower than you think and everything above that exempt figure is up for grabs. See example 1 below.
Example 1
A taxpayer files head of household with two dependents and earns $3,450 semimonthly.
Their exempt income (for this filing status/dependents/pay frequency) is $1,728.92.
IRS garnishes: $3,450 − $1,728.92 = $1,721.08 per paycheck
Nearly half their income disappears — because the exempt amount is fixed and the IRS takes everything above it.
2. The IRS can seize 100% of income above the exempt amount — not a percentage
There is no 25% limit like with private creditors. If your client earns more than their exempt amount by $2 or $2,000, the IRS can legally take every dollar of that excess.
Example 2
A taxpayer files single, is paid biweekly, and earns $1,780 per pay period. They pay $160 in court-ordered support (for a child not claimed as a dependent).
Income after required support: $1,780 − $160 = $1,620
Exempt income for this category: $612.50
IRS garnishes: $1,620 − $612.50 = $1,007.50
Clients always ask, “Why so much?” Because once they exceed the exempt amount, everything else is collectable.
3. Even modest wages get hit — the IRS formula doesn’t scale with cost of living
If a taxpayer barely earns more than their exempt income, the IRS still takes the difference.
Example 3
A taxpayer filing married filing separately with one dependent earns $565 weekly.
Weekly exempt amount: $406.15
IRS garnishes: $565 − $406.15 = $158.85 per week
Clients often say: “How can they take anything? I’m already barely making it.” The answer is simple — the IRS does not factor in actual expenses.
4. Fluctuating income produces wildly different levy amounts — big paychecks get hit the hardest
The IRS applies the levy formula every pay period, causing commission-heavy and fluctuating earners to experience the most emotional distress.
Example 4 (New Scenario Based on Original #4)
A taxpayer filing married filing jointly with five dependents earns semimonthly, with income varying due to commissions.
Exempt income per pay period: $2,347.18
Paycheck 1: $4,850 IRS takes: $4,850 − $2,347.18 = $2,502.82
Paycheck 2: $2,400 IRS takes: $2,400 − $2,347.18 = $52.82
Quarterly commission check: $6,300 IRS takes: $6,300 − $2,347.18 = $3,952.82
The levy feels unpredictable, but it’s not. The IRS applies the exact same formula every time — and large pay periods get gutted.
A quick note about these examples: The IRS calculates the garnishment after mandatory deductions like federal, state, and local income taxes; the employee’s share of Social Security and Medicare; and legally required retirement contributions are taken out.
Important: What the IRS does not consider are things like union dues, health insurance premiums, or repayments for payroll advances. Those reduce a client’s take-home pay, but they don’t reduce the amount the IRS is allowed to levy.
TL;DR
⏩ IRS wage levies turn on one number: exempt income.
⏩ Every dollar above exempt income can be seized at 100%.
⏩ High earners and fluctuating earners get hit the hardest because the exempt figure doesn’t change.
⏩ The IRS calculates the levy after mandatory taxes — but not after insurance, dues, or other voluntary deductions.
➥ Contact Attorney Stephen A. Weisberg for a free Tax Debt Analysis.
Contact Me Here: https://www.weisberg.tax/contact-1
Email: sweisberg@wtaxattorney.com
Phone/Text: (248) 971-0885
Address: 300 Galleria Officentre, Suite 402, Southfield, MI 48034
