How to Prevent an IRS Garnishment Action

Being taxed by the IRS is one of the most feared things about owing money to the government. Most people have no idea how to avoid a garnishment, but with a little education and paying attention to the notices you receive in the mail from the IRS, you can do a lot to avoid being charged by the IRS.

The first and most important advice that I can give to anyone: Submit your returns! If you have tax returns for something that hasn’t been filed, please do so. The IRS, and states in general, are much more concerned with your filing than with your paying the tax when you file. The reason for this is that if you don’t apply, they don’t know what to bill you. Because of this, they set the penalties for failing to apply at the highest penalty rate of anything. For example, the IRS penalty for not filing a return is 5% per month due, while the penalty for not paying tax is only half of one percent per month due.

Second, don’t ignore IRS notices. As a taxpayer, you have certain rights that are given to you by statutes and regulations. This often includes some type of appeal action on any intention of the IRS to garnish you. Probably the most important thing to look for in your mailbox is a notice titled “Final Notice of Intent to Levy.” Note that it will say “Final Notice”, not just “Notice”. In the upper right or lower right corner of the notice there will be a model letter number, which will read “Letter 1058.” If it says CP-504, then it is more of an initial notice, not the final notice. After the issuance of the “Final Notice of Intent to Levy”, you have 30 days to request consideration of appeals from the levy action. The final notice will generally include the appeal request form, which is IRS Form 12153. Fill out this form and return it within 30 days of receiving your 1058 Letter!

Filing an appeal will generally save you 30 to 60 days of time. This can allow you to do many things. Perhaps in that time you will have reorganized your finances so that you can afford to offer a monthly payment plan to the IRS, called an Installment Agreement. Perhaps in that time you could have applied for and received a loan that you could then use to pay off the IRS, as the IRS penalty and interest rates will likely be higher than any loan you get. Perhaps during that time you were able to borrow the money from friends or family, or you got an advance on your job. It may give you time to fully assess your situation to see if you qualify for an Offer in Compromise and allow you to file a tax assessment.

It is important to note that if you have a pending payment agreement proposal in effect, or have submitted a legitimate, complete, and accurate request for an offer in compromise, the IRS cannot take aggressive enforced collection actions, including garnishment action. . You can’t make a frivolous request for an installment agreement or a settlement offer simply to buy time, but if it’s a legitimate proposal, then the IRS can’t garnish your wages, seize your bank accounts, or take your property.

Here’s a summary of the amount of time you can buy with certain stocks:

Collection due process appeal request: 30 days to 3 months

Request an installment agreement: 30 days to 4 months

Request offer in compromise: 4 to 6 months

Request a hearing on the collection appeal process: 30 days to 4 months

Request assistance from taxpayer advocate: 30 to 90 days

In fact, you can go through each of these processes, which could allow you to avoid an enforcement action in up to a year and a half if the IRS administrative processes are sufficiently supported, which they usually are. This amount of time gives you ample opportunity to find out what you are going to do to address your financial affairs.

If you have a Revenue Officer assigned to you, the Revenue Officer will usually request documents related to your finances. Meeting the deadlines provided by the revenue officer and requesting additional time if necessary is another way to delay the enforcement action. Revenue officers will generally issue a Form 9297, Taxpayer Contact Summary, with the information requested and the timelines for providing it. For the most part, most revenue officers will not garnish your accounts if they feel like you are “playing ball.” However, if they feel that you are harassing them severely, they will not hesitate to issue a tax.

Lastly, if you’ve exhausted all other avenues to protect yourself, and tax action is clearly looming, you can take steps to minimize the impact of the tax. The IRS can impose many potential targets, such as investment accounts, bank accounts, paychecks, and even your physical cash register if you have a business that has one. Bank accounts tend to be the most common target.

If your bank receives a garnishment notice from the IRS, they are required to hold the funds in the account on the date of the garnishment and then forward that money to the IRS after 21 days. This provides two important things. One, it gives you 21 days to try to get the tax released. While most cases do not end in any way with the release of the fee, it may be more common than you think, especially if third parties are affected (for example, you cannot issue employee pay checks because the IRS seized your payroll account). Second, liens on bank accounts are generally issued as a one-time event. In other words, if you have $ 4,000 in the account on the date of the garnishment, that’s what the IRS will receive. If you deposit $ 2,000 more the next day, that money is NOT subject to garnishment. If you know a lien is likely to arrive, it may be a good idea to keep bank balances low by delaying deposits until the lien arrives. Also, if you can avoid it, don’t write checks to the account that could bounce if you know a garnishment is unavoidable.

I hope this article was helpful and that the advice from industry experts provided here helps you avoid the stress and hassle of dealing with IRS taxes.