Can the IRS Garnish Your Wages, Freeze Your Bank Account, or Take Your Property?

Ignoring IRS tax debt will not make it go away. The IRS can add penalties and interest, take money from your paycheck or bank account, file a federal tax lien, and, in serious cases, seize property.

But even if the IRS has already started collecting, you may still have options.

At Tomes Law Firm, we help individuals and business owners throughout New Jersey resolve IRS and state tax problems. We understand that people sometimes ignore tax notices because they are frightened, overwhelmed, or simply do not have the money to pay.

Our tax resolution team works together to determine what taxpayers actually owe, understand their financial situation, and find a reasonable way forward. This article explains what can happen when you ignore IRS tax debt, what rights you have, and how you may be able to stop collection action.

What Happens When You Ignore IRS Notices?

The IRS generally does not start taking your money without warning. When you owe federal taxes, the IRS normally sends a bill explaining what you owe and requesting payment.

If you do not respond, additional notices may follow. Eventually, the IRS may warn you that it intends to take collection action. Before most levies, the IRS must provide a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days before taking action.

That notice may give you the right to request a hearing to challenge the proposed levy or discuss collection alternatives. If you ignore the deadline, you could lose important appeal rights.

What If You Never Received the IRS Notices?

We sometimes hear taxpayers say, “But I never got anything from the IRS.” Perhaps you moved, separated from your spouse, or simply did not recognize the importance of the notices.

Unfortunately, not receiving or opening an IRS letter does not necessarily stop the IRS from collecting. The IRS can generally satisfy certain notice requirements by properly mailing the notices to your last known address.

If you have moved or believe the IRS has an incorrect address, correct the problem and find out whether any notices or deadlines have been missed.

Can the IRS Garnish Your Wages?

Yes. The IRS can send a wage levy to your employer requiring part of your paycheck to be sent directly to the government. Unlike a typical bank levy, a wage levy generally continues from paycheck to paycheck until it is released or the debt is satisfied.

Although certain amounts are exempt from levy, the remaining amount can leave you struggling to cover everyday expenses.

Scott’s Story: When the IRS Started Taking His Paycheck

Scott came to Tomes Law Firm after the IRS had started taking a significant portion of his paycheck. Like many taxpayers, Scott still needed to pay his ordinary living expenses. But the wage levy was taking money he depended on.

Instead of simply allowing the levy to continue, we reviewed his situation and worked toward a better arrangement with the IRS.

We were able to get Scott’s wage levy released and establish an IRS payment plan with monthly payments of approximately one-third of what the IRS had been taking from his paycheck.

That meant Scott had significantly more money available each month for his living expenses while continuing to address his tax debt.

Importantly, we did not reduce Scott’s total tax debt by two-thirds. We negotiated a payment arrangement that was much more manageable than the ongoing wage levy. Scott’s case shows that even after the IRS has begun taking your wages, you may have options. Getting help before a levy starts can prevent the disruption in the first place.

Can the IRS Take So Much of Your Paycheck That You Cannot Pay Your Bills?

An IRS wage levy can make it difficult to pay rent, a mortgage, utilities, groceries, and other necessary expenses. However, taxpayers have rights.

If the IRS determines that a wage levy prevents you from meeting basic, reasonable living expenses, the IRS must release the levy. That does not mean the tax debt disappears; the underlying debt still needs to be addressed.

The IRS will usually require financial information to evaluate hardship. Your income, housing costs, transportation, medical expenses, and other necessary expenses may matter. This is one reason it helps to have someone familiar with IRS collection rules review your financial situation.

Can the IRS Take Money From Your Bank Account?

Yes. An IRS bank levy can freeze money in your account and ultimately transfer it to the IRS. Unlike a continuing wage levy, a typical bank levy generally attaches to the funds available when the bank receives it.

The bank normally holds the money for 21 days before sending it to the IRS. This can create serious problems when you need that money for your mortgage, rent, food, business expenses, or payroll.

If your bank account has been levied, act immediately. There may be a limited opportunity to seek a release before the bank transfers the funds.

Can the IRS Take Your Tax Refund?

Yes. Suppose you owe the IRS $15,000 from an earlier tax year and file your current return expecting a $5,000 refund. The IRS may apply that refund toward your outstanding tax debt instead of sending it to you. This is called a refund offset.

Even taxpayers making monthly payments under an installment agreement generally have federal tax refunds applied toward the unpaid balance. In limited situations, special hardship procedures may be available before a refund is offset.

Can the IRS Put a Lien on Your House?

Yes. A federal tax lien is the government’s legal claim against your property because of unpaid taxes. A lien is different from a levy: a lien protects the government’s interest in property, while a levy allows the IRS to take money or property.

A federal tax lien can create problems when you want to sell or refinance your home. In rare cases, the government can pursue a forced sale of a home to collect unpaid federal taxes. These cases are unusual, but they show why IRS collection notices matter.

What If the IRS Is Wrong About What You Owe?

Before agreeing to pay a large IRS debt, make sure the amount is correct. Sometimes a balance results from a missing return, an IRS-prepared substitute return, an audit where documents were never provided, or a payment that was not properly credited.

Depending on the circumstances, you may qualify for audit reconsideration or another procedure to challenge the assessment. At Tomes Law Firm, reviewing IRS transcripts and understanding how a balance arose is an important part of evaluating a case.

You should understand what you owe and why you owe it before agreeing to a resolution.

Does IRS Tax Debt Disappear After 10 Years?

The IRS generally has 10 years from the date a tax is assessed to collect it. However, certain events can suspend or extend that collection period, including bankruptcy proceedings, certain appeals, and some requests for tax resolution programs.

The IRS may continue collection efforts while the collection period remains open. Simply waiting and hoping that the IRS runs out of time can be dangerous.

Does Ignoring Tax Debt Make It More Expensive?

Often, yes. Failure-to-pay penalties and interest may continue adding to your balance. And if the IRS starts collecting through wage levies, bank levies, or property seizures, you may face financial problems that could have been avoided by addressing the debt earlier.

What If You Cannot Afford to Pay the IRS?

Installment Agreement: The IRS may allow you to pay your tax debt over time through monthly payments.

Currently Not Collectible Status: If you cannot afford to pay while meeting necessary living expenses, you may qualify for a temporary pause in active collection.

Offer in Compromise: In qualifying cases, the IRS may accept less than the full amount owed.

Penalty Abatement: Some taxpayers qualify for relief from certain IRS penalties.

Appeals and Other Remedies: Depending on the circumstances and deadlines, you may be able to challenge collection action or dispute the underlying liability.

Each program has different rules. Not everyone qualifies. The best option depends on income, expenses, assets, tax history, and collection deadlines.

Why Should You Hire a Tax Attorney Before the IRS Takes Action?

Many people think they should contact a tax attorney only after the IRS has levied their paycheck or bank account. Getting help earlier may allow you to avoid those problems entirely.

At Tomes Law Firm, our tax resolution team can:

• Review IRS transcripts for taxes, penalties, interest, payments, and collection deadlines.
• Determine whether the claimed balance is correct.
• Review income, assets, and necessary living expenses.
• Communicate with the IRS on your behalf.
• Negotiate installment agreements and appropriate collection alternatives.
• Seek release of wage or bank levies when permitted under IRS rules.
• Explain what you must do to stay in compliance.

Our goal is not to promise that the IRS will forgive your debt. It is to find a realistic solution based on the law and your circumstances. Scott’s case shows how that approach can make a meaningful difference.

What Should You Do If You Have Ignored IRS Notices for Years?

First, do not assume it is too late. Gather IRS notices you have received, even if they are old. Determine which tax years are involved and whether collection has begun. Find out whether important appeal or payment deadlines are approaching.

If you have unfiled returns, those may also need to be addressed. Most importantly, do not promise payments you cannot realistically afford without understanding your options. A tax resolution attorney can help determine the next steps.

Frequently Asked Questions

Can the IRS garnish my wages without taking me to court?

Yes. The IRS generally can levy wages without first obtaining a court judgment, provided it follows the required legal procedures.

Will the IRS stop collecting if I ignore its letters?

No. Ignoring IRS notices can lead to more serious collection action.

Can I stop an IRS wage levy after it starts?

Sometimes. A levy may be released when legal requirements are met, including qualifying economic hardship or an appropriate collection resolution.

Will a payment plan reduce the amount of tax I owe?

Not automatically. An installment agreement generally lets you pay an existing debt over time; it does not itself forgive part of the debt.

What if I owe both the IRS and New Jersey?

Federal and New Jersey debts are handled by separate taxing authorities. You may need different arrangements for each.

Don’t Wait Until the IRS Takes Your Paycheck

The worst time to find out what the IRS can do is when your employer tells you that your paycheck is being garnished. By then, collection has already started. You may still have options, as Scott did, but the situation has become much more urgent.

At Tomes Law Firm, we have helped taxpayers who waited years before asking for assistance. Some were afraid. Others could not afford to pay. Many hoped the IRS would go away. Unfortunately, ignoring IRS tax debt rarely improves the problem.

The best tax resolution is often the one that prevents the crisis before it begins.

If you owe federal or New Jersey taxes, we can help you understand your options and work toward a realistic resolution.

We Solve Tax Problems. You Get Peace of Mind.

Contact Tomes Law Firm at www.tomeslaw.com to schedule a confidential free consultation or call the tax resolution attorneys and accountants at Tomes Law Firm at 732-333-0681 or 833-4IRS-TAX to discuss how we can help you.