Owing money to the IRS comes with fear – fear of losing your house, your property, your bank accounts, even going to jail. And the fear of your employer finding out you have a tax problem.
Your employer would discover your IRS problem if the IRS sent a wage levy to your job in an attempt to garnish your paycheck. That’s embarrassing.
But can your employer fire you for it? Can you actually lose your job because of your IRS problem?
The good news is that you cannot be fired from IRS attempts to levy your paycheck.
The Consumer Credit Protection Act protects you from termination due to a wage garnishment, including one from the IRS. But that’s not the end of the story for your employer. An employer can fined up to $1,000 for retaliating against your IRS problem, and can actually be imprisoned for up to one year. These matters would be handled by the U.S. Department of Labor. The legal citation is 15 U.S.C. 1674, and the IRS citation is Internal Revenue Manual 18.104.22.168.
But you want your job, and for the IRS to leave you alone, not a case with the Department of Labor.
If you have a threat of being terminated due to an IRS levy, I suggest the following steps to resolution:
- Communicate with the IRS. In most every case, the IRS issues a wage levy because of poor communication from you. The IRS has tried to contact you, has sent out letters requesting payment, and believes there has not been a satisfactory response. All the IRS wants is for you to contact them and make payment arrangements. When IRS doesn’t hear anything, they take action into their own hands.
- You probably can’t afford the levy taking your paycheck. The IRS needs to know that. They want to know what you earn, your monthly bills and what you own. In other words, how can you pay them back? Or maybe you can’t pay them back. Either way, the IRS needs to know. The IRS accepts financial hardship, no pay cases – their terminology for it is currently uncollectible.
- We may need to complete an IRS collection information statement. This tells the IRS how you can – or can’t – pay them back. Remember, the IRS is levying because they want information, and have not received it.
- If you owe under $50,000, and can repay the amount you owe within 72 months, the IRS does not need a detailed financial disclosure from you, and the levy release can be expedited with payment terms over the 72 month time period.
- If you have any unfiled returns, those need to be completed and filed. The IRS calls this compliance – they want you to be current on any unfiled returns. If completing the returns quickly is too burdensome, and the levy is causing an economic hardship on you, the IRS does have rules that permit a levy release without the returns and only a financial statement.
- Get the levy released. What you really want is to keep your job, not to sue your employer or contact the Department of Labor. With communication, IRS financial arrangements and compliance, the IRS will let go, and release the levy.
- Provide your employer with a copy of the levy release. I usually have the release expedited, with the IRS faxing a copy to me and your employer immediately, alleviating any delays by mail. When your wages are levied, time is the most important factor.