IRS Increases Wage Levy Thresholds: The Internal Revenue Service (IRS) has announced an increase in wage levy thresholds for 2025, a change that will affect many taxpayers facing tax debt collection. A wage levy allows the IRS to garnish a portion of a taxpayer’s paycheck to recover unpaid taxes. By adjusting these thresholds, the IRS has effectively changed how much of a person’s earnings are exempt from being levied.
For many taxpayers, understanding wage levies, exemption amounts, and ways to manage tax debt is crucial. This article provides an in-depth look at the new IRS wage levy thresholds, how they impact taxpayers, and what steps you can take if you’re facing a wage levy.
IRS Increases Wage Levy Thresholds
| Topic | Details |
|---|---|
| Wage Levy Definition | A legal process where the IRS garnishes wages to satisfy unpaid tax debt. |
| New Levy Thresholds | The IRS increased the exempt amount that taxpayers can keep before levy deductions. |
| Standard Deduction Impact | Higher standard deductions for 2025 mean more income is exempt from levies. |
| Who is Affected? | Taxpayers with outstanding IRS debts subject to wage garnishment. |
| IRS Payment Options | Installment plans, offers in compromise, and temporary hardship status. |
| Official IRS Resource | IRS Levy Guide |
With the IRS increasing wage levy thresholds for 2025, taxpayers will have more income protected from IRS wage garnishment. However, if you owe back taxes, it’s essential to understand your rights and options.
By setting up a payment plan, applying for hardship relief, or filing an appeal, you can protect your income and resolve your tax debt effectively. Stay proactive and seek professional guidance when needed. For official guidance, visit the IRS Wage Levy Resource.
What Is a Wage Levy?
A wage levy, also known as wage garnishment, is when the IRS takes a portion of a taxpayer’s paycheck to collect unpaid taxes. Unlike wage garnishments by private creditors, the IRS does not need a court order to initiate a levy. Once a levy is issued, the employer must withhold a portion of the employee’s wages and send it directly to the IRS.
How Wage Levies Work
- The IRS issues Notice of Intent to Levy (Letter 1058 or CP90) to inform taxpayers about the pending action.
- The taxpayer has 30 days to respond before the levy takes effect.
- If no action is taken, the IRS contacts the employer to garnish wages.
- A portion of the employee’s wages is withheld each pay period until the tax debt is settled or other arrangements are made.
How the New Wage Levy Thresholds Affect Taxpayers
Increased Exemption Amounts
Each year, the IRS adjusts the wage levy exemption amounts based on the standard deduction and inflation rates. The higher the standard deduction, the more income taxpayers can keep before a levy deduction applies.
For 2025, the IRS has increased wage levy thresholds, meaning:
- Taxpayers will have more of their income protected from IRS wage garnishment.
- Individuals and families keeping up with cost-of-living increases will face less financial hardship.
Example of New Exemptions
Let’s compare the 2024 and 2025 levy exemption amounts for a single taxpayer with no dependents:
| Year | Exempt Weekly Income | Exempt Monthly Income |
|---|---|---|
| 2024 | $289 per week | $1,256 per month |
| 2025 | $315 per week | $1,370 per month |
This means that if you earn $3,000 per month, under the new 2025 threshold, only income above $1,370 would be subject to levy.
What to Do If You’re Facing an IRS Wage Levy
If you have received an IRS wage levy notice, you have options to protect your income and resolve your tax debt.
1. Request a Payment Plan
A payment plan (installment agreement) allows taxpayers to pay off their tax debt in monthly installments. If you set up a plan, the IRS will stop the levy as long as payments are made on time.
- Short-Term Plan: If you can pay the balance within 180 days.
- Long-Term Plan: Monthly payments if the tax debt is over $10,000.
- Apply online at IRS Installment Agreements.
2. Submit an Offer in Compromise
An Offer in Compromise (OIC) allows taxpayers to settle tax debt for less than they owe. The IRS may approve an OIC if:
- The taxpayer cannot fully pay the debt.
- Paying the full amount would cause financial hardship.
- The IRS doubts it could collect the full debt.
3. Claim Economic Hardship Status
If a wage levy causes severe financial hardship, you can request the IRS to classify your account as “Currently Not Collectible” (CNC). This temporarily stops collection efforts.
To apply:
- Call the IRS at 1-800-829-1040.
- Provide proof of income and expenses.
4. File an Appeal
If you disagree with the levy, you can file a Collection Due Process (CDP) appeal within 30 days of receiving the levy notice.
- Use Form 12153 to request a hearing.
- Submit supporting documents showing why the levy is unfair.
FAQs
1. How long does an IRS wage levy last?
A wage levy remains in place until the debt is paid or you make arrangements with the IRS.
2. Will the IRS notify me before levying my wages?
Yes, the IRS must send a Notice of Intent to Levy and give taxpayers 30 days to respond.
3. Can I stop a wage levy if I owe back taxes?
Yes. Setting up a payment plan or claiming financial hardship can stop the levy.
4. Does the IRS levy bonuses and commissions?
Yes, the IRS can garnish regular paychecks, bonuses, and commissions.
5. What happens if I ignore an IRS wage levy notice?
Ignoring a levy can result in further enforcement actions, including bank levies and property seizures.
