Getting Wage Levies Released
Wage levies are vicious collection devices used by the IRS to get your attention. A wage garnishment can take up to 85% of your gross pay, leaving you with nowhere to sleep but the street.
In most cases our immediate goal is to remove the levy. In the case of a wage levy, Revenue Officers or ACS often (but not always) release wage levies upon request of an authorized representative. In effect, the IRS uses the wage levy as an attention-getter more than a revenue raiser. The IRS can also use that levy as a bargaining chip to get an installment agreement, a payment plan, etc. So the IRS is, by and large, fairly reasonable about releasing wage levies. The IRS must release, as soon as practicable, levies on salaries and wages made after 1999 once the IRS agrees with the taxpayer that the tax is not collectible.
The Code provides that the IRS must release a levy if the levy is causing an economic hardship for the taxpayer. There is economic hardship if the levy causes an individual taxpayer to be unable to pay his or her reasonable basic living expenses.
Almost by definition, a wage levy will cause hardship, but you may have to prove this. The regulations will take you through the necessary elements of proof, but basically, the client will have to fill out a Form 433-A (Collection Information Statement). The thrust of that statement will be to show your necessary living expenses. You can compare that to the amount that is left over after a wage levy and show that there simply will not be enough, thus causing hardship.
CAUTION:
The Collection Information Statement also alerts the IRS to your other assets. Also, sometimes Revenue Officers or ACS will try to negotiate the amount subject to the levy, so that the entire levy is not released. The proposed regulations do not appear to allow this, and we always bargain long and hard, quoting the regulations, to try to get a complete release. Barring a complete release, Code Sec. 6334(d) and its regulations specify the statutory exempt amount, and you can always try for more based on your financial circumstances. There is a table in IRS Publication 1494 that shows the exempt amounts.
PLANNING NOTE:
Also be sure to find out what other levies have been issued. Often the IRS will scatter them like a cluster bomb on banks, brokerage houses, etc. How do they know where your assets are? They take the information from your last filed federal income tax return, or from wage reporting statements, databanks of organizations such as the NASD, state governments or from any other source they can locate.
Cute, huh? But possible to overcome if you call us without delay.
Tags: Beating The Tax Man