IRS Wage Garnishment: May Be Even Worse Than a Bank Levy

Wage garnishment doesn't just cost clients money.

It costs them opportunities: home purchases fall through, businesses lose funding, and divorces and settlements get messier.

Professionals who represent taxpayers who may have tax debt who understand this process — and can help clients navigate it — protect their clients’ financial lives and their own professional relationships.

➲ Today, I’ll break down four key aspects you need to know about IRS wage garnishments.

1. The IRS Wage Garnishment Process and Rules

The IRS doesn’t garnish wages without warning.

➲ There’s a very specific process:

• First, the IRS assesses the tax debt and demands payment.

• The IRS will notify you before the potential garnishment through several notices, ending with the Final Notice of Intent to Levy.

• Then the taxpayer has 30 days to respond, appeal, or negotiate a resolution.

If you do nothing, the IRS moves forward — sending a wage garnishment order to the employer. The IRS won't take your entire check, but it leaves you with very little— many times not enough to pay your household bills.

Plus, once it starts, it doesn’t stop until the debt is fully paid, an agreement is made, or the statute of limitations expires. Plus, when the IRS levies your bank account, you have 21 days to resolve your debt before the bank sends your money to the IRS. Alternatively, when your wages are taken, there's no getting them back.

The IRS’s approach is aggressive — and by the time garnishment hits, you've lost any leverage you had.

2. Notices the IRS Sends Before Garnishment

When you realize your wages are being garnished, you shouldn't be surprised. And yet taxpayers are always shocked.

But before the IRS touches wages, they send a series of notices by mail.

➲ The key notices include but are not limited to:

• CP14: A balance due notice telling you that you owe money for unpaid taxes

• CP504: Notifies you that the IRS plans to take your state tax refund, and if that doesn’t cover your tax liability, they'll start searching for other assets, including wages, to cover it.

• CP90, LT11, LT1058: Notify the taxpayer that wage garnishment is next if they don’t act within 30 days. This is the Final Notice of Intent to levy. The notice will inform you of your right to an appeal.

Each notice is an opportunity to resolve the situation — but many clients ignore them or don’t understand what they mean. By the time the IRS contacts their employer, the window for simple solutions is rapidly closing.

3. Types of Payments the IRS Can Garnish

When clients think about garnishment, they often only imagine their main paycheck at risk.

➲ The reality is a garnishment's reach is much broader, including:

• Regular wages

• Bonuses and commissions

• Social Security benefits

Once the employer receives the garnishment notice, they calculate the exempt income based on Publication 1494 and send the rest to the IRS. The exempt amounts are minimal. Clients are often stunned at how little they are allowed to keep.

4. Wage Garnishment for Self-Employed Clients

Taxpayers think that if they're self-employed, they're safe from a wage garnishment.

They'd be wrong.

➲ The IRS can seize many forms of income when you're self-employed, including:

• Seize rental income

• Intercept payments from customers and clients: The IRS can contact your clients and tell them to send payments directly to the IRS. Trust me, your clients are going to listen to the IRS.

For a small business owner or independent contractor, these actions are devastating. Cash flow can dry up almost instantly, often taking the business down with it.

TL;DR (Too Long; Didn’t Read)

The IRS follows a process: assess, demand, final notice, and then garnishment.

⏩ Several notices (CP14, CP504, LT11) give clients warning — but they often miss them.

⏩ The IRS can garnish far more than wages — bonuses, rental income, and even Social Security.

⏩ Self-employed clients face levies on their income streams and business assets.

⏩ IRS wage garnishment is not just a tax collection tool. It has the potential to cause significant financial damage.

Professionals who understand how this unfolds — and recognize the early signs — can help clients avoid serious harm.

➤ Have you ever had a client face an IRS wage garnishment?

➤ How did you get it released?