How Can I Stop IRS From Taking My Wages After Bankruptcy?

02 Aug How Can I Stop IRS From Taking My Wages After Bankruptcy?

Filing a bankruptcy can stop a wage garnishment from the IRS. Many tax debts are eliminated with a bankruptcy discharge. What happens after bankruptcy if the tax debt was not discharged? The rules for discharging tax are clearly stated in another excellent article; but not all taxes can be discharged.

Automated wage garnishments can be stopped or prevented in many cases by tax professionals such as lawyers, CPAs or Enrolled Agents after bankruptcy. The IRS has established detailed financial standards it can use to determine the ability to make payments. If disposable income falls below established levels, IRS collection officers are allowed to discontinue enforced collections.

Bankruptcy lawyers know about IRS financial standards for living expenses because congress adopted these standards into the bankruptcy law in 2005. They are used to determine if a debtor can file a Chapter 7 or the amount of a Chapter 13 payment. IRS standards are based on average expenses for consumers compiled by the Government.

The IRS standards exempt enough income from levy or seizure to cover minimum living expenses. This exemption is not automatic. IRS collectors do not know where taxpayers spend their money. They must also be told about special needs such as medical expenses or a long commute to work. Otherwise, they will use their powers to levy wages or seize bank accounts until a tax debt is paid in full.

IRS collections are often automated and continue until the debt is paid in full or something is done to stop them. You may see the name “ACS” or Automated Collection Services on the many threatening notices sent daily from IRS computers. They come from a network of automated call centers that spit these intimidating notices out with limited human review.

An IRS garnishment called a “levy” can be sent to an employer, a bank or even to the Social Security Administration automatically. Once a levy is in place, it takes full payment, a bond or a documented hardship to stop it. This is a complicated process and it may require professional help.

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I was admitted to practice in 1978. I am certified as a Consumer Bankruptcy Specialist by the American Board of Certification. I regularly speak on tax and bankruptcy issues at state, regional and national conferences. Years of experience in practice before the Internal Revenue Service and Oregon Department of Revenue have given me the background to resolve a large variety of consumer tax issues.
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