An IRS levy on your wages or other income is limited by a defined exemption amount. Your exemption will be determined based on the standard deduction, your filing status, and the number of exemptions you claim. All income that exceeds the exemption amount will be taken by the IRS.
Unlike bank account levies, wage levies are continuous. The IRS will continue to take many out of every paycheck you receive until your full delinquent tax balance is paid off.
A few examples can illustrate how much money you will actually receive while the IRS is levying your wages:
- You are a single taxpayer with no dependents. Your exemption amount is $200.00 a week, or $866.67 a month. If you make $2,000 a month, the IRS can seize $1,133.33 per month.
- You are a Head of Household with two dependents, so you claim three exemptions on your tax return. Your exemption amount is $413.36 a week, or $1,791.67 per month. If you make $4,000 a month, the IRS can take $2,208.33 per month of your wages.
- You use the Married Filing Jointly status, and have three dependent children. You claim five exemptions on your return. Your exemption amount is $633.65 per week, or $2,745.83 per month. If you make $6,000 per month, the IRS can take $3,254.17 of your wages per month.
You can see how an IRS wage levy could put you in a very difficult financial situation. To make things even worse, the IRS can usually take the full amount of any bonuses you receive. If you receive commissions or other amounts on top of your base wages, the IRS may be able to take the entire amount of these additional payments.
For tax liability attributable to a joint tax return, the income of the spouse with higher earnings will usually be levied, but both spouses’ incomes can be levied in cases of flagrant neglect or refusal to pay.
How to Get a Wage Levy Released
A wage levy will be continuously effective until your delinquent tax debt is paid off, or until you make other arrangements to pay off the tax debt. You can attempt to get a levy released if you show that it is causing you financial hardship, or you can come to an agreement with the IRS as to how you will pay off the tax debt. If a levy is released due to financial hardship, you will still be on the hook for the tax liability you owe.
If you agree to a monthly installment plan or Offer in Compromise, you will be able to get the wage levy released. Contact a tax attorney to discuss the best strategy for getting rid of an IRS wage levy and the tax debt that caused it.