If you are unable to pay your federal or state taxes, you may not know where to turn. However, the worst thing you can do is them. Unpaid taxes at the federal or state levels can have serious consequences. Once the IRS or the New York State Department of Taxation and Finance has determined that a taxpayer owes back taxes, they will initiate collection efforts after a thorough assessment of the taxpayer’s debt. These collection efforts are significant and capable of causing lasting financial damage. One of the most serious penalties a taxpayer might face is wage levy, which is very similar to wage garnishment.
When the IRS or the New York State Department of Taxation and Finance pursues wage garnishment, these agencies will coordinate with employers who will then deduct garnishment percentages from an employee’s paychecks until the employee’s tax debt is satisfied. A wage levy is similar in that it allows the IRS or New York State Department of Taxation and Finance to directly deduct wages deposited into a checking or savings account.
Common Challenges With Wage Levy in New York
If a private creditor has a claim against an individual, they can pursue wage levy or wage garnishment by obtaining a judgment against the individual in court. When it comes to the IRS and the New York State Department of Taxation and Finance, these government agencies face no such restriction. Both of these agencies have the power to pursue a wage levy against a taxpayer without a court order.
Another issue many people face when it comes to wage levy from the IRS or the New York State Department of Taxation and Finance is that these agencies are not as limited as private creditors when it comes to the amounts they may withdraw for wage levy. Private creditors must adhere to state law. For example, New York allows a creditor to garnish or levy either 10% of an individual’s gross wages or 25% of the individual’s disposable income up to the point that the amount exceeds 30% of minimum wage. By contrast, the IRS and the New York State Department of Taxation and Finance examine an individual’s W4 exemptions and tax record and decide how much the individual may keep from their pay, not how much these agencies may take.
It’s not uncommon for an individual subject to wage levy in New York to be shocked once they see how much the IRS or the New York State Department of Taxation and Finance can levy from each of their paychecks. This causes a financially disastrous chain reaction for many people, especially those who live paycheck-to-paycheck to manage their everyday living expenses.
Overcoming Wage Levy in New York
There are a few options available if you are subject to wage levy in New York. The first option is to repay your overdue tax debt in full. This is not always feasible, and some taxpayers will need to arrange alternative repayment terms with the IRS and/or the New York State Department of Taxation and Finance. Before you start exploring your options for getting out of wage levy, it’s important to know what types of income the IRS and the New York State Department of Taxation and Finance can seize.
The IRS bases their wage levy determinations on the standard deduction and the taxpayer’s number of dependents. Under New York law, the New York State Department of Taxation and Finance can only seize certain types of income, but others are exempt from seizure. A few examples of exempt income include:
- Public and private pension income.
- Welfare and public assistance.
- Social Security and Supplemental Security Income.
- Benefits from unemployment, workers’ compensation, or disability.
- Spousal support, child support, and alimony payments.
If you receive a bonus from work, this bonus may be subject to levy if you have already earned more than the exempted amount of income.
A New York tax attorney can help you determine which of your income streams is subject to wage levy from the IRS or the New York State Department of Taxation and Finance. Your attorney can also help you determine if any alternative resolution options can spare you the financial impact of long-term wage levy. It’s crucial to take immediate action when you are facing wage levy in New York.
Why Is a Tax Attorney Necessary for Fighting Wage Levy?
An experienced New York tax lawyer can analyze your interactions with the IRS and the New York State Department of Taxation and Finance as well as your tax history to determine what options are available to you. For example, your attorney may help you negotiate an alternative repayment plan with either or both agencies. An Installment Agreement allows you to repay your tax debt over time and spares you from wage levy, but you must meet certain criteria and make payments on time and in full if you want to avoid further punitive action from these tax agencies.
A tax attorney may also help you form an Offer in Compromise to the IRS or the New York State Department of Taxation and Finance. This is essentially a settlement negotiation that may allow you to avoid wage levy and satisfy your tax debt for less than the full amount owed. This is a complex formal legal process that requires very careful consideration and complete accuracy. If you omit any necessary information or make serious errors in your Offer in Compromise, you could face significant penalties. If this happens, the Offer in Compromise will fail in its intended purpose.
Seek Legal Counsel as Soon as Possible
A wage levy is a serious matter. It can easily lead to severe financial strain for a taxpayer and their family. Both the IRS and the New York State Department of Taxation and Finance have extensive reach when it comes to wage levy, and these agencies pursue collection efforts on unpaid taxes quite aggressively. If you have recently received a Notice and Demand for Payment from either the IRS or the New York State Department of Taxation and Finance, hire an experienced New York tax attorney. They can help you navigate this matter swiftly to avoid the long-term financial fallout that can follow wage levy.
At Delia Law, Attorney Dawn Delia and her team have extensive experience handling complex tax cases involving both the IRS and the New York State Department of Taxation and Finance. Our team understands how these agencies work and the impact their internal policies might have on an individual’s financial situation. If you need wage levy assistance in New York, contact Delia Law and schedule a consultation with an experienced legal team.
New York-Specific Tax Laws
