Wage Garnishment (Wage Levy) Exempt Amount
Only the “exempt” amount limits what the IRS can garnish (levy) from a taxpayer’s paycheck. The taxpayer’s employer sends all wages above the “exempt” amount to the IRS. The taxpayer then keeps this “exempt” amount.
IRS Form 668-W and IRS Publication 1494
The IRS sends form 668-W and publication 1494 to the taxpayer’s employer. The employer fills out the form 668-W according to information supplied by the taxpayer. The employer uses this information to select the “exempt” amount from the tables in publication 1494. To arrive at the correct amount, the employer asks for tax information from the taxpayer.
Wage Garnishment (Wage Levy) Calculation
Previous year tax return filing status, number of exemptions and salary frequency are all used to decide the “exempt” amount. The taxpayer has three days to provide this information to the employer. If not provided in time, the IRS assumes a taxpayer filing status of married filing separately with one exemption. This often results in a lower “exempt” amount.
Wage Garnishment Example
For example, assume a taxpayer’s true filing status is married-filing-jointly, has three exemptions and a $1,000 weekly salary. The 2012 IRS publication 1494 tables show an “exempt” amount of $448.08. The employer sends the $551.92 weekly balance to the IRS. If the taxpayer does not present timely information the IRS then assumes a much lower “exempt” amount of $187.50. The lower “exempt” amount obviously causes more pain.
Wage Garnishment Release (Removal)
This wage levy remains in effect until either of the following occurs:
- Garnished wages fully pay off the tax debt.
- A wage garnishment release (wage levy release) is obtained after the taxpayer reaches a settlement with the IRS.