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Posted on Mar 3, 2009 in Tax Q&A | 0 comments

Do All of My Tax Returns Have to Be Filed to Release an IRS Wage Garnishment

When we spoke to a recent client about their case, I thought we were clear that all returns had been filed, but the client just owed the IRS money for a few years.  They had just been informed by their employer that an IRS wage garnishment or levy was about to start on their wages unless they could get it released before the next payroll (about 5 days away).  Because we thought everything was good and because the client didn’t owe an extraordinary sum (less than $10,000), I thought this was going to be a quick, easy representation.  Upon calling the IRS to negotiate the release of the levy, I was informed that there were, in fact, outstanding tax returns that must be filed. 

Before the IRS will negotiate with you whether it is to negotiate the release of a wage garnishment or to ask them to accept an offer in compromise, you must have at least the last six years tax returns filed.  If you do not, the IRS will not begin to negotiate with you.

I always urge my clients to go ahead and file their tax returns on time every year whether they can afford to pay the tax or not.  Why?  For two main reasons.  First, by filing you immediately avoid the failure to file penalty that the IRS assesses.  This can add up quickly.  The failure to file penalty is 5% of the tax owed per month up to a maximum of 25%.  Yuck!  Second, by filing, you begin the statute of limitations clock running for how long the IRS to collect the tax that you owe.  If you never file the clock never starts and you are stuck with the IRS for the rest of your life or until you finally pay off the tax, penalties and interest. 

If you have a wage garnishment or just found out that the IRS has levied your pay at work, you can get that levy released.  I have written a short manual, Emergency Tactics to Stop the IRS From Taking Your Paycheck, that gets to the point pretty quickly and teaches the same techniques that tax lawyers are paid thousands to do to get wage levies and garnishments released from the IRS every day.  Check it out if you would like to get some more information about release of a levy prior to consulting with a tax lawyer or CPA or if you would like to take matters into your own hands and keep them in-house.