The IRS Levy And Legal Powers Of Garnishment Defined
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Understanding IRS Levies and Garnishment Powers
Overview
An IRS garnishment is a legal action that allows the IRS to seize a portion of your income to satisfy unpaid tax debts. By law, the IRS can garnish up to 25% of your disposable earnings or the amount by which your earnings exceed thirty times the current federal minimum wage.
How It Works
If you're struggling with unpaid taxes, the IRS may resort to garnishment as a last option. However, they often prefer to work out a payment plan if taxpayers provide the necessary financial information, such as tax returns and full disclosure of assets, including cash, bank accounts, and investments.
Financial Disclosure
It's essential to prove there's insufficient cash to cover the debt. This includes detailing all checking, savings, and brokerage accounts, and showing you cannot borrow the necessary funds. Even retirement accounts should not have available liquidity for covering the debts.
IRS Garnishment Limits
The IRS typically does not handle garnishment cases below $25,000. According to garnishment laws, you'll need to pay the difference between your monthly income and necessary expenses, as determined by the IRS. These expenses must be documented through a specific IRS form, and if you're a business owner, you must also submit a business financial statement.
Consequences
Once the IRS determines your monthly payment amount, expect penalties and interest to accrue on any outstanding balance. This often results in paying more than the original tax due because additional charges are applied over time.
Avoiding Garnishment
To avoid these situations, it's crucial to address tax debts proactively. While some promoters claim that tax debts can be settled for less through the Offer in Compromise program, eligibility is stringent and must meet specific criteria.
In summary, understanding and managing tax obligations are vital to preventing IRS garnishment and its financial consequences.
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