A smaller paycheck can turn an IRS problem into an immediate household problem. Before you try to work out a long-term payment solution, start with what is happening now: is the IRS taking money from your wages, or has your bank frozen money in your account?
Those are different situations. For a wage levy, money can be taken from more than one paycheck. If it leaves you unable to meet basic living expenses, contact the IRS using the number on the levy notice and explain the hardship. The IRS says a wage levy creating an immediate economic hardship must be released. That depends on the IRS determining your financial circumstances, not simply on making the call. IRS: Levy hardship
Why is money coming out of each paycheck?
An IRS wage levy generally continues each pay period until the overdue taxes are paid, other payment arrangements are made, or the levy is released. It is not necessarily a one-time deduction.
Part of your wages may be exempt. The calculation depends on factors including filing status and dependents. Your employer should give you a Statement of Dependents and Filing Status to complete and return within three days. If you do not return it, the IRS says the exemption is calculated as married filing separately with no dependents. If you have other income, exemptions may be allocated there, so do not assume a fixed percentage of every paycheck is protected. IRS: Wage levies
What should I have in front of me when I call?
Gather the levy notice, recent pay information and a simple list of household income and essential expenses. Note what the levy leaves you able to pay, and what you cannot cover.
The IRS describes economic hardship in terms of being unable to meet basic, reasonable living expenses. It usually needs financial information to make that determination. Having the documents ready makes it easier to explain your situation accurately. IRS: Levy hardship
You do not have to arrive knowing every tax term. Start with the notice, the amount coming out of your pay and the practical effect on your household.
What if the money is frozen in my bank account instead?
A bank levy follows a different process. The IRS describes a 21-day waiting period before the bank complies with the levy. Funds are frozen based on when the bank receives it; normally, money added afterward is not affected by that particular levy.
Contact the IRS promptly if you need to discuss payment or an error. Do not treat the 21-day bank process as extra time for a wage levy, and do not assume that calling automatically releases the funds. IRS: Bank levies
Does a release mean the tax debt is gone?
No. Releasing a levy does not remove the balance due. You still need to address the underlying tax debt, and the IRS says a levy may be reissued if it remains unresolved.
Other grounds for release can include payment of the amount owed or an installment agreement whose terms do not allow the levy to continue. The details matter. Applying for a payment plan is not the same as having an agreement that requires release. IRS: Getting a levy released
What if the IRS refuses to release it?
You may be able to appeal a denial. The IRS also describes a separate process for requesting the return of money already collected. A release and a return of funds are different requests; neither should be assumed from the other. Check the notices and applicable appeal procedure for your situation. IRS: Levy release and appeals
Talk through the notice with IRS Help
If you would like help understanding the notice and discussing your situation, book a free 30-minute consultation with IRS Help. Bring your notice and your questions. No pressure, no judgment.
You can also read about IRS Help’s tax resolution services.
General information about federal IRS levies. State collection rules and the right next step for an individual case may differ.
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