Yup, IRS has ordered a wage garnishment

[grandmasusan]

I received a nasty surprise this morning when I checked my work email. The IRS has ordered a wage garnishment. So that means I have to file now rather than later. I plan on filing by myself since most of the credit debt is in my name but I just realized that my spouse will probably get hit with the wage garnishment too. So does he have to file as well or can I just do it and the wage garnishment will stop for the both of us? I really need some help!!!


Thanks in advance...

seriously freaking out here!!!

[tofargone]

did you file joint on your taxes?

[grandmasusan]

yes we did so that is why i am so worried! we can't survive the bk and a wage garnishment at the same time.

[Granny]

Have you called the IRS and worked out a payment plan with them? They don't want to garnish your wages, they do that to get your attention. You should already be familiar with the standards so you should be able to work through the collection process. However, the standard for BK are not the same for collections so go their website and read them thoroughly, as they vary for different parts of the country. Go to their website and download Form 433-A, Form 433-B and Form 433-F. Fill out those that apply to your situation and then call them. They will lift the garnishment once you have an Installment Agreement.

It is possible that they could find you uncollectible. I've helped several people get that status. Their income just didn't support making payment to them. Others are paying as low as 25.00 per month. Be prepared to defend your expenses but you can do this, and then you can postpone filing until you are ready.

[tofargone]

Otherwise depending on how old the back taxes are you can file on them, but you may have to file jointly unless you can somehow claim an injured spouse. I would talk to a lawyer about it I will bet they deal with it a lot.

[grandmasusan]

Because we owe so much (65k), they won't do an installment plan unless the balance is 25k or less. So that means I need to come in with 32k. I talked to an attorney and he said that once I file, the garnishment is lifted including my husbands even though he is not filing. He's a co debtor and therefore is protected too.

I am going to file on Friday so I can stop the garnishment from hitting my spouse's paycheck on the 30th. What a nightmare!!

Thanks to everyone who posted. I do feel better but still worried about other pitfalls!

[Granny]

Because we owe so much (65k), they won't do an installment plan unless the balance is 25k or less.

Grandmasusan,

They will do an installment agreement, you just have to go higher up the ladder to get it. The regular collection department can't set up an installment agreement but the special collections department can. I do at least one a year, and the last one I worked on the taxpayer owed about the same as you and they found him uncollectible. He has a house with a good size equity and they let him go, his income was not high enough.

Here's their thinking...The statue of limitations clock continues to click until you file for bankruptcy. If you come out of bk without having resolved the issue, the clock starts again. If they don't agree to an installment agreement, they get nothing. You can always call the taxpayer advocate line, sort of a 911 and they can stop the garnishment. The IRS doesn't want to garnish your wages, they know you can't live on what is left after a garnishment. They only want your info so they can clear the file and their case load and move on to someone who may be able to pay.

If you are not ready to file yet, don't throw in the towel and file early until you give this a try. If you want, send me a private message with your phone number and I will coach you. Your attorney won't tell you this because he wants your money and he's not up on IRS collection procedures. Don't let him rush you.

[CindyLou]

When were the taxes due? Were they filed on time? both of these things will come into play on whether they are dischargable.

[grandmasusan]

Granny,

Wow, you gave GREAT info. I had no idea that I could still possibly get an installment agreement. I am definitely not ready to file but feel rushed to doing so. I will send you a private msg. Thank you so much!!!!

I have always filed my taxes on time and what I owe is for 2005.

[lrprn]

I have always filed my taxes on time and what I owe is for 2005.

Then these taxes are not dischargeable in bankruptcy - they aren't old enough .

I'm so glad that Granny is so knowledgeable about working with the IRS and can help you!! Thanks for generously sharing your hard-earned knowledge to help out, Granny!

[BKOnce]

How can tax in one year can be that so much unless many years owed or a very high business income!?

[grandmasusan]

BKONCE,

I made a ton of money in 2005 and didn't properly withhold. I also didn't have many offsetting expenses. My household income was 324k in 2005, but has dropped by 50% in 2006 and will drop another 25% in 2007. Thus my reason for having to file BK 13. My expenses equal my current take home pay.

Being in real estate, my income has been affected by the downturn in the market. It's been a stressful time in my life and husband's. I don't know if we are ever going to get out of it!

[CindyLou]

You will get there!! Its a hard road, but you are taking the righ steps. Have you considered calling one of those tax attorneys that specialize in offers in compromise???

[Granny]

You will get there!! Its a hard road, but you are taking the righ steps. Have you considered calling one of those tax attorneys that specialize in offers in compromise???

From my personal experience, an offer in compromise is not a good idea. If you think the paperwork required for BK is bad, you ought to see what is required for an OIC. What happens is this:

1. They figure what you can pay over the next five years based on your income and their standards. Say you have $200 a month available to pay them, multiply that by 60 and you have $12,000.00. They don't allow extra payments for unsecured debts in this either or tuition or retirement depsosits, so the dollar figure can really go a lot higher than most people can or want to afford.

2. Take all the equity you have in everything they could possible get their hands on and add that to the $12,000.00.

That's the offer they will accept, except they want it all up front or you can pay it back over a 24 months or over the life of the statue of limitations.

The problem with an OIC is it stops the statue of limitations clock from ticking while the offer is being considered which is usually 6 months and it also adds an additional year to the statue when the clock starts again. This then gives them 11+ years to collect. Of course, BK also stops the ticking clock while the case is active, but at least it doesn't add to the time they can collect.

One advantage of paying through BK is that penalties and interest are not paid in BK as a secured debt.

The advantage of the installment agreement is that you pay them the figure from #1 above until the statue runs out and there is no additional time added and the clock does not stop ticking. You may have to go through the process of re-evaluating the financial picture every three years, but not always. A change in the gross income would trigger the need to re-evaluate and they monitor that when you file each year.

I saw one taxpayer who owed taxes from 1985. He filed BK twice, Ch 7 in 1985 and Ch 13 in 1990, which he didn't complete and then attempted an OIC in 1996. By 1999, the statue to collect for 1985 was still ticking because the clock had been stopped so many times. That's 14 years later. The happy ending to his story is he was declared uncollectible and the clock finally ran out on all of his old taxes. The liens all expired and they got nothing. Talk about staying under the radar, he was definitely under their radar.