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What is Wage Levy?

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Alisson Ward

Tax Professional | Content Writer

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Understanding What is a Wage Levy

A wage levy is a legal process where a government authority, often the Internal Revenue Service (IRS) or a state tax agency, takes a portion of an individual’s wages directly from their paycheck to settle an outstanding tax debt. In simpler terms, it signifies that if you owe taxes and haven’t paid them, the government can compel your employer to deduct a specific amount from your earnings and transmit it to the tax authority to cover the unpaid taxes. Typically, they take this action when other attempts to resolve the tax debt have not succeeded, and it can carry significant financial implications for the individual involved.

Understanding the Implications

Now that we’ve broken down the term, let’s explore what a wage levy entails:

  1. Legal Process: This levy is not something that happens randomly. It’s a legal process initiated by a government agency, typically the Internal Revenue Service (IRS) or a state tax authority. They use a wage levy as a way to collect unpaid taxes.
  2. Garnishment of Wages: When a levy is in effect, a specific percentage of your earnings is taken directly from your paycheck by your employer. This money is then sent to the government to cover your outstanding tax debt.
  3. Serious Consequences: A levy is a significant step in the collection process. It indicates that previous attempts to resolve your tax debt, such as payment plans or negotiations, have not been successful. Ignoring a levy can lead to serious consequences, including financial hardship and damage to your credit.

Why Would a Wage Levy Happen?

Several scenarios can lead to a wage levy:

  1. Unpaid Taxes: If you owe back taxes and haven’t made arrangements to pay them, the government may resort to a wage levy to collect what you owe.
  2. Non-Compliance: If you consistently fail to file your tax returns or report your income accurately, the government may use a wage levy as a means to enforce compliance with tax laws.
  3. Ignored Notices: Before a levy is initiated, you will receive multiple notices from the tax authorities, warning you about the consequences of unpaid taxes. Ignoring these notices can escalate the situation to a wage levy.

How to Settle Levy Problem

If you encounter a wage levy, taking prompt action to resolve the situation and regain control of your finances is crucial. Here are steps you can follow to settle a wage levy:

  • Contact the Tax Authority: Reach out to the relevant tax authority, such as the IRS or your state’s tax agency, to understand the specifics of your levy and the total amount owed. This will help you determine the scope of the issue.
  • Negotiate a Payment Plan: In many cases, tax authorities are willing to work with taxpayers to establish a reasonable payment plan. This allows you to pay off your tax debt over time in manageable installments.
  • Explore Tax Relief Options: Depending on your financial situation, you may be eligible for tax relief programs, such as an Offer in Compromise (OIC) or Currently Not Collectible (CNC) status. These options can help reduce the overall amount you owe.
  • Seek Professional Assistance: Dealing with a wage levy can be complex, and it’s often beneficial to seek the assistance of a tax professional or tax relief service like Priority Tax Relief. They can navigate the negotiation process on your behalf and ensure you receive the best possible outcome.
  • Stay Compliant: Once you’ve resolved the wage levy, it’s essential to stay compliant with your tax obligations moving forward. This includes filing tax returns on time and making estimated tax payments if required.

Conclusion

Understanding the basics of a wage levy is the first step toward effectively addressing the situation. If you face a wage levy, remember that you have options, and seeking professional guidance from Priority Tax Relief can significantly impact your situation. By taking proactive steps and actively working to resolve your tax debt, you can regain control of your financial future and enjoy peace of mind.

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