If you owe taxes to the IRS or the New York State Department of Taxation and Finance, it’s vital to know how to resolve this issue as quickly as possible to avoid significant penalties. Both the IRS and the New York tax authorities have the power to legally seize your property and your wages to satisfy an unpaid tax debt. If you recently received a Notice and Demand for Payment from either of these agencies, a New York tax attorney can be a valuable ally. 

What Is Wage Garnishment?

The IRS and the New York State Department of Taxation and Finance have many collection tools at their disposal when a taxpayer falls behind on their tax obligations. First, these agencies will review a taxpayer’s records and determine their full tax liability. Next, they will send a Notice and Demand for Payment to the taxpayer. This Notice will provide the taxpayer with important information, including the total amount due and the deadline for payment.

If the taxpayer does not pay the full amount or respond to the Notice, these agencies have the power to pursue collection actions against the taxpayer. One of the most common methods used by both is wage garnishment, but the process is different at the federal and state levels. Essentially, garnishment is a deduction of each of the taxpayer’s paychecks that persists until the tax debt is paid in full. 

IRS Wage Garnishment

When the IRS garnishes your wages, they are not beholden to the same restrictions as most private creditors. For example, New York state law restricts how much a private creditor may garnish from an individual’s wages, and the creditor must secure a judgment against the individual before coordinating garnishment. Once the creditor has a judgment, they will coordinate with the individual’s employer, who will then deduct an appropriate percentage from each of the employee’s checks and remit to the creditor.

The IRS does not need a judgment to initiate wage garnishment. Additionally, there is no rule outlining how much the IRS may take from a taxpayer’s paycheck. Instead, the IRS’s internal policies dictate how much the taxpayer may keep from each check, and many taxpayers hit with IRS wage garnishment are stunned when they see how little they have left from each of their paychecks due to IRS wage garnishment.

New York State Wage Garnishment

The New York State Department of Taxation and Finance has a different method for handling wage garnishment for unpaid taxes. The Department will file an income execution against the taxpayer, requiring them to pay up to 10% of their gross wages or 25% of their disposable income from each paycheck voluntarily. If the taxpayer is unable to make timely payments, the Department will then coordinate with the taxpayer’s employer to arrange automatic deductions from the taxpayer’s paychecks. Wage garnishment at the state level will persist until the taxpayer’s outstanding overdue balance is paid in full, and this includes any accrued interest and penalties.

Resolving Wage Garnishment in New York

Wage garnishment from the IRS or the New York State Department of Taxation and Finance will continue until a tax debt has been paid in full. However, both of these agencies do allow some alternatives depending on individual circumstances. A New York tax attorney can help a taxpayer explore several potential alternatives to wage garnishment, including:

  • Negotiating an Installment Agreement. This will allow the taxpayer to repay their tax debt over time instead of through a single lump payment. While the taxpayer’s balance will continue to accrue interest and fees, an Installment Agreement can provide flexibility and help the taxpayer avoid wage garnishment.

  • Offer in Compromise. Before the IRS or the New York State Department of Taxation and Finance begins wage garnishment, a tax lawyer can help a taxpayer submit an Offer in Compromise that allows the taxpayer to satisfy their tax debt for a lower amount than they actually owe. This is a difficult formal legal process that requires substantial effort and solid legal guidance to be successful.

  • Filing for “Currently Not Collectible” status. If wage garnishment would cause irreparable and long-term harm to the taxpayer or they are otherwise unable to repay their tax debt, there is an option. A New York tax lawyer may help them qualify for “Currently Not Collectible” status due to financial hardship. This prevents further collection efforts from the IRS or the New York State Department of Taxation and Finance until the taxpayer’s financial situation improves.

  • Filing an appeal. Though rare, the IRS or a state tax agency can make an error in determining a taxpayer’s tax liability. If you believe you received a Notice and Demand for Payment in error or wage garnishment action has been initiated against you without proper notice, an attorney can help you appeal the decision.

If you are interested in exploring any of these alternatives to wage garnishment, it is vital to act as quickly as possible after receiving your first Notice and Demand for Payment from the IRS or the New York State Department of Taxation and Finance. Waiting too long runs the risk of these agencies starting wage garnishment proceedings against you. Once wage garnishment starts, it is very difficult to stop it. Being proactive and seeking professional legal counsel for your tax problems is the best way to prevent wage garnishment in New York.

Why You Need a Tax Attorney

Handling any form of unpaid tax matter is a very challenging problem that requires professional guidance. While both the IRS and the New York State Department of Taxation and Finance offer taxpayers multiple options for avoiding wage garnishment, navigating the processes behind these options is rarely easy without help.

At Delia Law, Attorney Dawn Delia and her legal team have years of experience successfully handling complex tax issues, helping clients avoid wage garnishment and other penalties whenever possible. If you have received a Notice and Demand for Payment from the New York State Department of Taxation and Finance or the IRS, our team can help you avoid wage garnishment and reach a swift and reasonable resolution to your unpaid tax burden. Contact Delia Law today to learn more about how our firm can provide wage garnishment assistance in New York and schedule a consultation with an experienced and reputable New York tax attorney.

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