Latest Facts and News
- The minimum penalty for returns filed sixty days late has risen from $510 in 2024 to $525 in 2025. This increase assures the IRS of timely tax reporting.
- Several penalties for inaccurate information returns in 2025 include $60 if filed up to 30 days late, $130 if filed 31 days late till August 1st, $330 if filed after August 1st or not filed, and $660 for intentional disregard per return.
- The Tax Cuts and Jobs Act (TCJA) provisions will expire in 2025, potentially raising the top tax rate for high-income earners from 37% to 39.6% in 2026.
- If the TCJA expires, most taxpayers will face higher taxes, potentially a 22% increase.
When the IRS decides to collect unpaid taxes directly from your paycheck, it’s not just a letter; it’s a serious move that may affect your everyday life. If you’ve ever wondered what an IRS wage levy really means and what’s at stake, you’re in the right place.
This blog will help you understand what triggers these actions and how to protect your income before it’s too late.
What is an IRS wage levy?
An IRS wage levy is a legal action where the IRS takes money directly from your paycheck to pay off unpaid taxes.
Do not mistake IRS wage levy with IRS wage garnishmentSometimes these terms are used interchangeably, but there’s an important difference in how they work.
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What triggers an IRS wage levy?
A tax levy is typically triggered when you fail to pay your owed taxes despite multiple notices from the IRS. An IRS wage levy is a serious legal action taken by the IRS to collect taxes.
Here’s a detailed outline of what triggers an IRS levy on wages:
- Unpaid or unresolved tax debt: If you owe taxes and take no action, whether by paying, disputing, or applying for relief, the IRS may begin levying your wages to collect what’s due.
- Ignoring IRS notices and deadlines: Disregarding notices, including the Final Notice of Intent to Levy, tells the IRS you’re not cooperating. This can fast-track enforcement.
- Failing to use available relief options: When you don’t respond to IRS payment plans or fail to qualify for or apply for programs like Offer in Compromise or Currently Not Collectible, the IRS may proceed with a levy.
- High balances or unfiled returns: Large tax debts or years of missing returns increase your risk. The more unresolved issues, the more likely the IRS is to take action.
IRS notice process
The IRS provides a series of notices before proceeding with the final wage levy notice to collect unpaid taxes. This process typically takes several months from the first notice, giving you multiple opportunities to respond.
Below is a breakdown of the steps taken by the IRS:
- Notice and demand for payment: This is the first notice given by the IRS to inform you about the taxes owed if you fail to make the payment.
- Final notice of intent to levy and notice of your right to a hearing: If you fail to respond to the first notice, the IRS sends a final notice of intent to levy. This notice informs you about the IRS’s plans for wage seizure and asset seizure
Ignoring these notices may result in serious consequences, so it is vital to respond to them quickly to avoid a wage levy.
You wouldn’t want to cripple your situation further. If you’ve received an IRS notice, this is your window to act; reach out to Hall’s IRS before the levy takes effect.
How does the wage levy process work?
Being aware of each step in this process gives you the ability to act before it’s too late and protect more of your earnings.
IRS notification
The IRS sends a Notice and Demand for Payment to collect unpaid taxes. If no response is received, the IRS proceeds with a Final Notice of Intent to Levy (Notice CP90), informing you of the wage levy and explaining your right to a Collection Due Process hearing within 30 days.
IRS sends Form 668-W to the employer
If you fail to settle the debt within 30 days of receiving the final notice, the IRS sends Form 668-W(ICS) or Form 668-W(ACS) (Notice of Levy on Wages, Salary and Other Income) directly to your employer. The employer is legally bound to comply with the IRS and begin withholding from your wages.
Statement of dependents and filing status
Your employer will provide you with a Statement of Dependents and Filing Status form that you must complete and return within three days. If you do not return the statement within three days, your exempt amount is calculated as if you are married filing separately with no dependents (zero).
Wage levy begins
The wage levy begins when your employer is required to withhold a portion of your wages and send it directly to the IRS. Employers generally have at least one full pay period after receiving the levy form before they are required to send any funds to the IRS. The amount withheld is calculated using IRS Publication 1494, leaving you with only the exempt amount based on your filing status and dependents.
Impact on finances
The wage levy impacts your finances and leads to financial strain, affecting day-to-day living. Unlike other creditors who can only garnish up to 25% of disposable income, the IRS can take much more, potentially leaving you with only the minimum exempt amount for basic living expenses.
Continuous nature of levies
The wage levy continues on each pay period until the tax debt is fully paid or the levy is released. The levy is continuous, meaning it automatically attaches to each paycheck without requiring additional notices.
How can a wage levy be released?
- The wage levy process will stop once the tax debt is paid off
- If you can prove significant financial problems, the IRS may temporarily suspend or reduce the levy
- IRS payment plans or an offer in compromise can result in the release of the levy
Exemptions and limitations in wage levies
Certain exemptions and limitations are designed to protect you from financial hardship caused by wage levy. These are as follows:
- Publication 1494 exempt amounts: The IRS must leave you with a specific exempt amount based on your filing status and number of dependents, as outlined in Publication 1494.
- Filing status considerations: Greater exemptions are available based on your filing status – married taxpayers filing jointly receive higher exempt amounts than single filers.
- Age and disability exemptions: If you are over 65 or blind, additional exempt amounts apply. A single taxpayer over 65 receives an extra $38.46 weekly exemption on top of their base amount.
- Statement of dependents requirement: Your employer must provide you with a Statement of Dependents and Filing Status form when they receive the levy notice. You have three days to complete and return it. If you miss this deadline, the IRS calculates your exemptions as if you are married filing separately with no dependents.
Income Types with Special Rules:
Certain types of income have different levy protections:
- Supplemental security income (SSI): Completely exempt from IRS wage levies
- Social security disability (SSDI): Subject to an ongoing 15% levy for delinquent taxes
- Unemployment benefits: Generally exempt from IRS wage levies
- Veterans’ disability compensation: Typically exempt from IRS collection
Steps to release or prevent a wage levy
Here is a comprehensive look at how to release or prevent a wage levy before it impacts your income and brings financial hardship.
Direct payment solutions
| Option | What You Can Do | When It Works | Processing Time |
| Pay in Full | Pay the entire tax debt amount | When you have sufficient funds available | 1-2 business days after payment clears |
| Installment Agreement | Set up a monthly payment plan | When you can afford regular monthly payments | 30-60 days for IRS approval |
| Offer in Compromise | Pay less than the entire amount owed. | When financial hardship prevents full payment | 6-24 months for review and decision |
Relief Based on Financial Circumstances
| Relief Type | What You Can Do | When It Applies | Requirements |
| Economic Hardship Relief | Request a levy release due to financial hardship | When a levy prevents covering basic living expenses | Detailed financial documentation proving hardship |
| Exempt Income Release | Request release based on protected income | When primary income is from SSI or certain veterans’ benefits | Evidence of an exempt source of income |
| Innocent Spouse Relief | Apply to remove liability for spouse’s tax debt | When a spouse accrued debt, and you are not involved or are not even aware | Strict qualification criteria and extensive documentation |
Legal and administrative options
- File a Collection Due Process (CDP) hearing within 30 days of receiving the Final Notice of Intent to Levy. This prevents new levies while your case is under review.
- File for Currently Not Collectible (CNC) status if you can demonstrate that paying would create financial hardship. This temporarily pauses collection but doesn’t eliminate the debt.
- File for bankruptcy, which may provide an automatic stay on collection activities. Only certain tax debts qualify for discharge under specific conditions.
Remember, each of these options requires meeting specific IRS criteria and obtaining IRS approval. The sooner you take action after receiving IRS notices, the more options you will have.
Preventative measures to avoid IRS wage levies
Avoiding an IRS levy on wages is always better than dealing with one levied upon them. Here are some key preventive measures you should consider to protect your income from Levy:
- Utilize direct deposit for refunds: If you are due for a refund, always consider direct deposit to ensure you receive your refund quickly.
| Pro Tip: You can also use the refund to settle existing tax debt to avoid penalties. |
- Stay updated about tax laws: Always check changes in tax laws, such as tax rates, deductions, or tax credits, as they can impact the amount owed. Keeping current with the IRS tax laws and regulations can help prevent wage levy.
- Use the IRS withholding calculator: Always check your tax withholding status with your employer to ensure your withholding is accurate per the current tax situation. Fill out Form W-4 with your employer to avoid underpayment, which can eventually lead to a levy.
| Click here to estimate your withholding and ensure you are on track with the IRS |
- Avoid tax evasion and fraud: It is always better to file taxes on time and precisely as per the tax laws and regulations. Engaging in tax fraud and evasion might lead to severe consequences, resulting in IRS levies on wages.
- Consult with a tax professional: If you are facing a tax situation, seek help from a tax professional to solve complex financial issues or negotiate payment plans. They can help you understand IRS rules and ensure you comply with tax laws.
| Consult Hall’s IRS today for professional guidance and avoid costly mistakes that can lead to wage levy. |
Timely tax compliance strategies
Payment of taxes within the time given by the IRS helps avoid penalties and interest accrued upon your tax debt, leading to potential wage levies. The IRS offers various payment plan options if you cannot fully settle the debt.
Also Read: Does an IRS Offer in Compromise Take Away Your Tax Refunds?
Take control of your tax situation today with Hall’s IRS!
What led to the IRS levy on wages? Are these missed filings, withholding mistakes, long overdue taxes, overlooked deductions, etc.? Identifying the right cause can help you prevent wage levy. At Hall’s IRS, we have an expert team helping clients resolve these issues and design proactive strategies to prevent wage levy and reduce tax liability.
Focusing on a streamlined approach to tax planning can effectively overcome the situation, thereby reducing debt and protecting income from levy.
FAQ's
The IRS always sends a notice before issuing any wage levy. First, the notice for payment is issued, which, if not addressed, leads to the final notice of intent to levy. For more information on the IRS wage levy, contact Hall’s IRS for assistance.
The IRS follows Publication 1494 to determine how much of your wages are exempt from levy based on your filing status and dependents. The IRS can take a much larger portion of your paycheck than other creditors, potentially leaving you with only the exempt amount based on your filing status and dependents.
After receiving the final notice of intent to levy, you can appeal a wage levy by requesting a collection due process hearing with the IRS. Present your case during the hearing process, ask for alternative options to make payment, or provide valid documents showing financial hardship to challenge the levy.
Yes! With tax professional help, you can negotiate with the IRS to enter a payment agreement plan or offer-in-compromise to settle the debt to resolve the wage levy. Whether you are facing financial hardship or the levy is affecting your exempt income, the expert team at Hall’s IRS is here to help you explore your options and find a resolution.
A wage levy lasts until the tax debt is paid off or the IRS agrees to a settlement through alternative options. However, if the tax debt isn’t resolved, the levy can continue until you demonstrate significant financial hardship or if you qualify for tax debt relief options.
