IRS Levy Deduction Information: How Does the IRS Determine What to Deduct from Your Paycheck?

You’re dealing with tax debt and worried about penalties from the IRS. The thought of an IRS levy deduction from your pay has likely crossed your mind.

If you are subject to a levy, your wages could be seized by the IRS with the intention of paying off your debt. This is a frightening possibility if you’re already struggling to get by on your current paycheck.

The thought of any wages being taken by the IRS is worrisome, but a lot depends on how much the agency would potentially seize. Keep reading to get a better sense of the extent to which your paycheck could be affected:

Determining the Wage Levy Exemptions

A portion of your wages will be exempt from IRS efforts to seize your income. This amount is determined based on the standard deduction and the number of dependents you possess for the year in which the levy is issued.

Calculations for levy exemptions are referenced in detail in Publication 1494. The resource categorizes levied taxpayers based on their status: single, head of household, married filing separate, or married filing a joint return.

From there, the amount exempt is determined based on the number of dependents and whether pay occurs on a daily, weekly, bimonthly, monthly, or annual basis. A separate table provides insight into exemptions for taxpayers over the age of 65 or those who are blind.

What About Bonuses?

Unfortunately, the IRS has the power to levy entire bonuses, as exempt amounts are determined based on time periods in which typical wages are paid. As such, bonuses should not be factored into personal financial planning if you’re facing the possibility of a levy.

If you’re desperate to avoid levies and other problematic actions from the IRS, it is crucial that you seek assistance from a proactive tax resolution service. Our team at Highland Tax Group can help; reach out today to learn how.