How does an IRS wage levy work?
The IRS sends your employer a levy, and part of your wages goes to the IRS each pay period until one of three things happens: you make other arrangements to pay, the debt is paid, or the levy is released (IRS: information about wage levies).
Part of your pay is exempt. The exempt amount is based on the standard deduction and the number of dependents you are allowed, and your employer works it out from a statement you fill in.
What should I do this week if my wages are being levied?
Three things help right away:
- Fill in the Statement of Dependents and Filing Status your employer gives you and return it within three days. If you miss that window, the IRS rules figure your exempt amount as married filing separately with zero dependents, which leaves you the least possible pay.
- Gather every IRS notice you have, especially any LT11 or Letter 1058. Those letters carry appeal deadlines.
- Call us or the number on the levy. The sooner a payment arrangement is in front of the IRS, the sooner a release can be discussed.
Bonuses get no separate exemption. The IRS says a bonus paid separately from your regular wages goes to the IRS in full, because the exempt amount was already applied to that pay period.
When does the IRS have to release a levy?
The IRS lists the cases where it is required to release a levy, including when you pay what you owe, when you enter an installment agreement whose terms do not allow the levy to continue, and when the levy causes an economic hardship that stops you meeting basic living expenses (IRS: how do I get a levy released). A release does not cancel the debt; you still need an arrangement, or a new levy can follow.