We don’t often write about celebrity tax problems in this blog. And while you may not owe $2.5 million in back taxes, this story does illustrate the tools the IRS has at its disposal to collect.
In August, the IRS filed a $2.4 million tax lien against the rap artist’s property. Now the Service is seeking some of the income he is scheduled to earn from five concert tour dates. A request to seize a portion of the proceeds from ticket sales has been sent to Ticketmaster. Could your wages be taken if you have past due tax debt?
The details of how the process works
Yes, the IRS can send your employer a form seeking to levy/garnish your wages, salary (this could include commissions or bonuses) or other income. Your employer has one pay period before they are required to hold and send funds.
The levy, similar to any garnishment, is ongoing. But it can also seize deferred compensation payments (i.e. retirement or pension income).
The levy form will include the total amount due including penalties and interest through the date shown on the form. The IRS generally only releases the levy if the amount is paid in full or you make some other arrangement, such as an installment to pay the tax debt.
How much can be taken from your wages? Tables list the amount you get to keep based on your filing status and number of exemptions. In 2016, if you are married, file a joint return and have one child (3 exemptions), your bi-weekly pay above $951.92 could be seized to satisfy the tax bill. If this poses a significant hardship, you may have an argument for relief.
At first notice of a levy, speak with a tax attorney to create a strategy that resolves the tax problem and avoids garnishment.