IRS and NYS Tax Levy

IRS wage garnishment is a form of tax levy imposed by the tax authorities for unpaid tax debt under the tax law. A tax levy is a seizure of your property to satisfy an unpaid tax bill. Wages and salary include fees, bonuses, and commissions and can be subject to the tax levy. The tax levy may also attach to future payments until the levy is released.

Under the tax law, the IRS can not levy a taxpayer until three requirements are met: 1.) The IRS assesses your tax and sends you a Notice and Demand for Payment; 2.) You did not, or refused to pay, the tax; 3.) The IRS sent you a Final Notice of Intent to Levy and Notice of Your Right to a Hearing, at least 30 days before the levy. If the IRS levies your wages or salary, the tax levy will end when: 1.) The levy is released; 2.) you pay your tax debt in full; or 3.) The time expires for legally collecting the tax (usually 10 years). It is important to note that there is no limit on the amount that the IRS can levy from your wages. There is, however, an amount that is “exempt.” Anything you earn about the “exempt” amount is what the IRS can tax levy from your wages. This “exempt” amount from the tax levy is determined based on your filing status of your last tax return, how frequently you are paid, and the number of exemptions you claim. Overall, it tends to be that only about 10% to 20% of your wages are exempt from the tax levy.

Under the tax law, New York State Department of Taxation can not issue a levy until a tax warrant is filed (in most cases). A tax warrant is a formal legal action again a taxpayer. The warrant is a public record filed with your local county clerk’s office and the New York State Department of State, disclosing that you owe taxes to the State. The warrant states that the Department of Tax has a right to collect your tax debt through a tax levy, income execution, and seizure and sale of property. The warrant may show up on your credit report, which as a result will make if more difficult for you to borrow money or buy and sell property. For levies with the New York State Department of Tax, you may remove all or part of a levy if you: 1.) Pay your tax bill in full; or 2.) Document the funds as exempt (if they are exempt, the NYS Tax Department will work with you to resolve the levy). Examples of exempt funds include: social security and supplemental security income, public assistance (e.g., welfare), alimony or child support, benefits such as unemployment, disability workers’ compensation, and public or private pensions, under the tax law.