How to Stop IRS Wage Garnishment

Identify the right solution for back taxes to end IRS wage garnishment and save your paychecks.

How to Stop IRS Wage Garnishment


When you have tax debt, it’s possible that the IRS will garnish part of your wages in what is known as “continuous levy.” If you don’t respond to their request for repayment, the IRS will inform your employer and a large part of your paycheck will automatically go toward your tax debt balance. They can take a quarter or more of your monthly income, which can mean heavy financial strain. Fortunately, there are many options for how to stop IRS wage garnishment. Decide which option is best for you so you can stop IRS wage garnishment and minimize the financial burden.


Method 1: Pay off the debt in one lump sum

Pay off the debt up front.

If you have the means, pay off your tax debt as soon as you find out about the wage garnishment. You have to fail to reply to the IRS for the wage garnishment to start, but it’s possible you missed these communications. You can pay over the phone, by mail, via money order, or online with your debit or credit card or straight out of your bank account. This is the fastest method for stopping wage garnishment if you have the means to make it happen. If you need an extra boost to pay off the IRS, you may consider selling or liquidating an asset.


If you have never promised to pay your debt in full before, the IRS may fully release your wage garnishment with a mere promise to fully pay your tax bill within 60 days.

Estimated Time: 1+ hours


Method 2: Set up a repayment plan

Apply for a payment plan for paying off your tax debt.

An installment agreement between you and the IRS means that you can pay off all of your debt in small installments. You make monthly payments that fit your budget based on a financial statement or a fixed monthly amount for up to six years. Review the plans and start the process online or over the phone. The IRS will charge a user fee to your overall balance when you set up an installment agreement.


If you are a low-income taxpayer, you may be eligible for a fee waiver that covers the user fee for your plan.

Perform Time: 15 minutes – 6 hours

Response Time: 1-3 months

Payment Time: Varies by plan


Method 3: Settle your tax debt for less than you owe

Negotiate a payment plan that allows you to pay less than you actually owe.

Visit the IRS website and complete the OIC pre-qualifier to see if you may be eligible to settle your debt for less than what you owe. If you qualify, it will reduce the overall amount of tax debt you have to pay back with a legal settlement. Before the IRS will consider permitting you to use an OIC, you must file all your tax returns. If you are granted an OIC, you must also stay completely up to date on your taxed for five years following.


If your OIC request is rejected, you can appeal the rejection within 30 days of receiving your assessment from the IRS.

Perform Time: 3-6 hours

Response Time: 4-6 weeks

Assessment Time: 4-24 months

Appeal Processing Time: 1-6 months

Payment Time: 2 years or less

Need help setting up an offer in compromise? can connect you to a tax debt professional.

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Method 4: Declare hardship

Contact the IRS and explain that the wage garnishment is causing you financial hardship.

If the IRS hears your story and determines that you really need the income they would take, they may stop the levy on your wages. However, this doesn’t mean that you never have to pay off your tax debt. Declaring hardship will just buy you more time because you qualify for Currently Not Collectible status. The IRS will only start collection actions again once your financial situation improves.


Do your research about your financial situation before you call the IRS to make the process go faster.

Perform Time: 2-8 hours


Method 5: Declare bankruptcy

File for bankruptcy to get tax debt discharged.

You can stop IRS wage garnishment if you declare bankruptcy. When you file for bankruptcy, you get an automatic stay that stops all collection actions, including garnishment, repossession, and foreclosure. This can result in a big hit to your credit score, so don’t take this option lightly. But bankruptcy can be a good way to get a clean break from debt, including back taxes.


Read up on bankruptcy taxes to prepare for the aftermath of filing.

Time:  6-60 months, depending on your filing


Method 6: Get professional help

Contact a tax debt professional to help you stop IRS wage garnishment.

Having your wages levied is a complicated and stressful experience. Ensure you are making the right decisions and understand all of the options available to you by hiring a professional who knows exactly how to stop IRS wage garnishment. A good tax professional will be able to leverage your financial information in a way that protects you and results in a solution to the IRS Collections problem you are facing. You can get a free consultation from a certified tax resolution specialist to identify the right solution for your needs. Beware of tax professionals who are not experienced in IRS collections.

TIP: can help you find the right tax debt professional for your needs.

Estimated Time: 30 minutes – 1 hour


Method 7 (the crazy, not-at-all-advisable method): Quit your job

Resign or switch jobs.

This isn’t the wisest option. But, because it takes a while for the IRS to file for wage garnishment with a new employer, quitting is a way to avoid paying your tax debt right away but the IRS will almost always catch up with you and when they do, they will likely have less empathy.


Create a game plan before you even think about putting in your two-week notice.

Time: 2+ weeks

You don’t need to do something crazy to get rid of your tax debt. Find out how can help you.

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How to Get Rid of a Tax Lien

Learn everything you need to know, from paying off IRS liens to how to remove a tax lien from your credit report.

How to Get Rid of a Tax Lien

When you don’t pay your tax debt, the IRS can file a tax lien, which is a legal claim to your property. This is different from a levy, which would mean the IRS is actually seizing the property. A tax lien shows other creditors that their interest in your property comes first. What does this mean for your credit? Nothing good. Besides potentially affecting your credit score, tax liens on your credit report can make it harder for you to buy a house or get a business loan. These instructions explain how to get rid of a tax lien by working with the IRS. We also explain how to remove a tax lien from your credit report, if you still have tax liens that appear.

Note on 2017 Tax Lien/Credit Report Updates: In July of 2017, the guidelines that credit bureaus follow for listing tax liens on credit reports changed. The bureaus considered a lien’s information complete when it had a birth date or Social Security number, a name, and an address. The 2017 changes mean that supplementary data is now necessary for publishing liens on credit reports. If fewer than 3 out of 4 of these data points are missing (which is the case for many tax liens) then the lien will not be present on your credit report at all. These steps will help you get rid of the tax liens still present on your report even after these rule changes.


Step 1: Pay off your tax debt

Pay off your tax debt in one lump sum or in smaller installments.

This is the most direct way to get rid of a federal tax lien.  Even if the Notice of Federal Tax Lien is not impacting your credit, it will impact your ability to sell or obtain property. Any time a debt exists to the IRS, there is a statutory lien in place making the IRS a priority creditor. There are a ton of options to get into an IRS program that will resolve the tax lien.

TIP: can connect you to a tax debt professional who can guide you through the process of paying off your tax debt.

Estimated Time (Lump-sum Payment): 30 minutes – 1 hour

Estimated Time (installment agreement): Varies by program but generally up to six years.


Step 2: See if you are eligible for withdrawal

Check the guidelines for applying to have a tax lien withdrawn.

You can apply if you meet the following requirements:

  • The IRS released your lien and you paid off all of your tax debt.
  • Withdraw of the tax lien will facilitate collections of the tax liability.
  • Withdraw is in the best interest of both the taxpayer and the government.

Other guidelines were created under the IRS Fresh Start initiative, which made it easier for taxpayers to repay loans.

Fresh Start also made it possible for taxpayers to have their lien withdrawn if they agreed to a Direct Debit installment agreement. A Direct Debit installment agreement takes monthly payments toward your tax debt directly from your checking account. Tax lien withdrawal requirements for those in a Direct Debit installment agreement are as follows:

  • The balance of your tax debt must be $25,000 or less.
  • You must pay all of your tax debt either before the expiration of the collection statute or within 60 months, whichever comes sooner.
  • All of your other files must be in compliance.
  • You’ve paid 3 Direct Debit payments in a row.
  • You have no history of defaulting on any Direct Debit installment agreements.

When you meet these requirements, you can begin the lien withdrawal process.


Double- and triple-check these criteria against your personal finances to increase your chance of having your withdrawal accepted on the first try.

Estimated Prep Time: 1-2 hours

Stuck with tax debt and don’t know where to begin? will connect you to a tax professional who can help.

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Step 3: File for withdrawal

Send your application for lien withdrawal to the IRS.

Start by filling out IRS Form 12277. It’s a simple, one-page form. This is basically a request to reverse IRS Form 668(Y), which is the Notice of Federal Tax Lien you received when the IRS created the lien. If everything goes as planned, you should receive IRS Form 10916(c) in the mail. This form is a statement of tax lien withdrawal, meaning that the lien can officially be removed from your credit report.


Make copies of the completed form or take notes during the phone call to keep for future reference.

Estimated Form Time: 15-30 minutes

Estimated Response Time:  30-60 days


Step 4: Contact the credit bureaus

Send a letter to the 3 credit bureaus alerting them to the withdrawal of your tax lien.

The three credit bureaus are Equifax, TransUnion, and Experian. To finalize the withdrawal of your tax lien from your credit report, send a letter to all 3 of the bureaus disputing its inclusion in your report.


Include a copy of your credit report and the IRS Form 10916(c) that you received in the mail.

Total Time: From 30 days up to 4 months

Talk to someone about your tax debt today and take back control of your financial situation.

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Can a Judge Forgive Your Debt? And Can a Judge Send You To Jail?

Question: A friend of mine is disabled. Her only income is her Social Security disability benefits. She got into a lot of credit card debt, and one of the credit cards got a judgement against her in court.

A friend told her that because of her low income, the court might just maybe forgive her debt. Is this true?

And what would happen if other credit cards brought her to court? Can she go to jail because she can’t afford to pay the debt back? God, I hope not. Thank you for your help. We appreciate your kindness and your consideration with this question. Thank you so very very much.

— Dori in New Hampshire

Howard Dvorkin answers…

Getting out of debt isn’t as hard as you think. However, understanding how to get out of debt may be the hardest part. Debt management is a program that can cut your total credit card payments by 30 or even 50 percent by drastically reducing the interest rates. And when you’re done, you emerge with no debt and a great credit score.

With debt settlement, you pay pennies on the dollar of what you actually owe. But your credit score can take a major hit, because you’re actually paying less than what you owe. Debt forgiveness means you might pay nothing on your debt, but good look getting a loan in the future.  How do you decide which is best for you? Let help you figure it out. Call now for a free debt analysis.

Let’s start at the end, because that last question is the easiest to answer: No, you can’t go to jail for unpaid debts. As long as you’re not defrauding your creditors or doing something illegal, trust when it says: “No matter what those debt collectors threatened you with, the police won’t be beating down your door.”

If you click that link, you’ll learn that the United States hasn’t imprisoned debtors since the 19th century. It’s no mystery, however, where that fear comes from: Unscrupulous debt collectors either imply it or come right out and threaten it. In 2013, the last year could find statistics, the federal government recorded more than 16,000 complaints that “collectors falsely threatened to arrest the consumer or seize their property for refusal of payment.”

With that out of the way, let’s talk about your friend’s debts.

Yes, it’s possible your friend could have her debt wiped clean. It’s called debt forgiveness, and it’s a powerful weapon. However, like all powerful weapons, it can injure more than just the target you aim it at. That’s why has a report called, A Realist’s Guide to Credit Card Debt Forgiveness.

I urge you and your friend to read it, because debt forgiveness has gotten a bad name lately. Why? Because bad people are advertising that they can clear all your debts with forgiveness — and don’t worry, there’s absolutely no downside! It’s amazing and only we know how to do it!

Of course, you’ll end up paying these middlemen a hefty fee for a shoddy service, and you might even end up worse than before you contacted them. Think of it this way: Would you pay hundreds of dollars to someone promising a guaranteed weight-loss plan that lets you eat as many cupcakes and potato chips as you want, with absolutely no downside?

If you want a serious diet plan, you should consult your doctor first. If you want a serious debt plan, you also need to consult a professional. I recommend calling a certified credit counselor at a nonprofit credit counseling agency, where your friend can receive a free debt analysis. From there, all the options can be explored, from a debt management plan to bankruptcy.

If you don’t know which nonprofit agency to contact, can introduce you to a reputable one. Bottom line, Dori: Your friend doesn’t have to go through it alone.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

Ready to seek real credit card debt relief? can set you up with certified credit counselors who know how to help.

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I Know There’s A Judgment Against Me For Credit Card Debt, But There Might Be More. What Can I Do?

Question: A few years ago, we found ourselves in a very tough financial situation. So we made the decision to prioritize our bills.

Unfortunately, we fell behind in our credit cards. As time passed, we were able to settle with a few of the cards, but there are a few left that are in limbo somewhere. I know of one that received a judgement against me, and I think there are two more.

The thing is, I haven’t heard from them and I’m not sure what to do. File bankruptcy? Hire a debt settlement company? Or contact the creditors directly?

— Ullisses in Illinois

[ founder Howard Dvorkin]

This letter is REALLY revealing. Not for what the writer says, but because of what he doesn’t know.

It’s very common for smart Americans to forget to ask basic questions. Like:  How much debt do I owe? Who do I owe it to? And what’s the deadline before bad things start to happen?

Look, I get it. Figuring out your finances is way down the list of fun activities. I’ve been a financial counselor and author for more than two decades, and even though this stuff fascinates me, I know other people look at budgeting like they look at flossing: It’s important, but it’s boring.

Here’s the thing: No one will help you floss your teeth, but there are professionals who can help you with your finances.  It is important to get a debt analysis so you can learn what you need to do. And it’s even easier than flossing, because all you do is call

If you want to get out of debt, knowledge is powerful.

Howard Dvorkin answers…

My answer is going to be general because your question is general. In other words, I can’t be specific because you’re not completely sure how many credit cards you still have open, and which ones have judgments against you.

That said, I can offer you one specific and urgent piece of advice: Pull your credit report. Learn how here: Where and How to Get Your Free Yearly Credit Report. However, I’ll tell you to ignore one part of the advice in that report.

Because there are three credit bureaus — Equifax, Experian, and TransUnion — the law says you’re entitled to one free report from each bureau every 12 months. and other experts advise you to pull a report from one bureau every four months. That lets you notice any irregularities in a timely fashion, then repair your credit either by yourself or with the help of others.

In your case, I’m advising you to pull all three reports right away. Your priority is finding out exactly what you owe and to who — and soon.

In my experience, if a credit card company went to the trouble to take you to court and get a judgment against you for unpaid bills, you owe at least $5,000. Any less, and it’s not really worth the trouble. (Although don’t misjudge what I just wrote: Your card issuer still wants and expects to be paid back. They have other options.)

I’m concerned that you “think” you might have more judgments against you. So I also urge you to contact your creditors right after you pull your credit reports. Rest assured, if you owe them, they’ll be able to tell you.

In these cases, I sometimes hear this faulty logic: “Howard, they haven’t contacted me, so if I ignore it, I don’t have to pay!” While it’s true that there’s a statute of limitations on credit card debt, playing that waiting game is dangerous. First, each state has its own rules, which you can see on this map.

Right now, I’d recommend against debt settlement, which has its own set of drawbacks. While you need to pursue bankruptcy at some point, that’s the very last step. Your first ones are to simply gather all your facts. Once you do that, I’d consult a certified credit counselor for a free debt analysis. You can reach one by calling at 855-996-9980.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

If My Husband Owes Taxes Do They Come After Me?

Question: I have a home and other assets. I recently married and then found out my husband had not filed taxes for 10 years — and owes the IRS $38,000! Is my home, bank account, and assets subject to a lien? Are they at risk? If my husband owes taxes do they come after me, even if he incurred the debt before we got married?

— Debra in Texas

If My Husband Owes Taxes Do They Come After Me?

If my husband owes taxes do they come after me? A reader doesn’t care about her husband’s old flames, just his old bills. Three of the happiest words in the English language are, I love you. Three of the absolute scariest words, Internal Revenue Service.

When you combine them it can get really confusing. Some of the trickiest financial questions I’ve ever heard were from spouses stuck in tax disputes. Tax problems are complicated enough when one person is involved. When it’s two spouses filling jointly it’s the difference between walking a tightrope and walking a tightrope while giving someone a piggyback ride, and don’t get me started on community property estates.

For that you need a read my much longer answer to Deborah on and check out our section titled, “If my spouse owes back taxes and I liable?”. This is a good time to remind couples who aren’t yet married, but are planning to sit down together and make a list of your finances. I’m talking the good, I’m talking the bad, and I’m talking the ugly your assets and your debts.

I’ve always said the best way to deal with the IRS is to never get on their radar. If you want advice for how to budget so you don’t get in trouble consult before you say I do.

Howard Dvorkin answers…

Even though I’ve been a CPA and financial counselor for more than two decades, I prefer to consult tax experts on questions like these — just to confirm I’m right.

In this instance, my instincts proved correct, says Don Markland, chief revenue officer for the Tax Defense Network. partners with Markland’s firm because of its experience and adherence to’s Code of Ethics.

Says Markland…

The easy answer is yes, Debra is liable. Texas is a community property state, and debt created during the marriage is owed by both spouses.

Of course, when it comes to taxes, nothing is easy. So let’s break it down.

What are community property states?

If you live in one of these states — and there are only nine of them —  all the property and debt acquired during a marriage belongs to both spouses. Texas is one such state. (The others are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Washington, and Wisconsin.)

“Income or assets created during the marriage are subject to collections,” Markland says. “Your income and bank accounts are at risk.”

What about before the marriage?

“Generally, premarital assets are not community property and can be protected,” Markland says. Please note the word generally. That’s because other factors come into play. Here’s just one, Debra: Are you filing jointly or single?

“This will greatly influence your returns,” Markland says.

What to do next

First, you should read the report that touches on this very topic. It’s called If My Spouse Owes Back Taxes Am I Liable?

While that report is, in my humble opinion, the best and cleanest explanation I’ve yet seen, it’s still not a pleasurable read. That leads me to warn you…

Because tax issues are complex, and because you live in a community property state, you need to consult an expert. Whenever I tell people this, they usually express fear: How much will this cost me?I tell them: You will indeed pay a fee, but if you consult a reputable expert, it’s almost always less than it would cost you to try it on your own — and always less than the cost of ignoring the problem until it catches up with you.

Concludes Markland: “We’d love to talk to Debra and walk her through this. It can be complicated, but we have experts who handle this all of the time.”

I can vouch for that.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.


When Is A Debt No Longer Collectible?

Question: What does it mean that a credit debt is no longer collectible? My father is now in a home, and when I went through his financial records, I found he owed nearly $2,000 on a credit card from the 1990s! Does he still have to pay that? He says he doesn’t, but he’s also suffering from some dementia. Will I get stuck with this bill, since I’m now taking care of him? My mother died a few years ago, and I’m an only child.

— Regina in New York

Howard Dvorkin answers…

The answer is simple: Your father owes nothing. The explanation behind the answer is a little more complicated. I’ll describe it like this….

Let’s pretend we’re peering into a crystal ball and viewing your father back in the 1990s. He has run up $2,000 on his credit card and has simply ignored his statements. What happens next? If you want all the gory details, read’s report, What Happens If I Stop Paying My Credit Cards?

I’ll cut to the chase: Six months later, after his credit card issuer has asked nicely and sternly to please pay what you’ve already spent, the entire amount goes into collections.

So when is a debt no longer collectible?

Debt collectors have a dark reputation, and rightly so. It’s a tough business, and unscrupulous collectors were so pervasive, the federal government passed a law to protect us from them. It’s called the Fair Debt Collection Practices Act. Luckily, it was passed long before your father stopped paying his credit card bill, so he was protected by it.

Another law says the statute of limitations on debt collection is a maximum of 15 years. It depends on where your father was living, because each state is different. (New York is only six years.)

Suppose your father’s debt went into collections even as late as the end of 1999. If it wasn’t paid by the end of 2014, it’s now “time-barred.” That means your father can’t be sued to collect the money. It’s as good as gone.

Even if it wasn’t, you’re not affected unless your name was on the credit card account. I most often hear similar questions from spouses. (Check out Am I Responsible For My Spouse’s Credit Card Debt?)

This all sounds like good news, but I’ll give you this warning: Review your father’s financial records carefully. In my experience, someone who ignored their credit card bill until it went into collections probably didn’t stop there. He may have more recent bills that also went unpaid.

Depending on their dates and dispositions, he could still be pursued by debt collectors. I’ve heard of collectors targeting the children of infirm parents, hoping to scare them into paying. You need to know your rights. Check out’s Debt Collection report before responding.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

Can A Credit Card Company Sue You After 7 Years?

Question: I was reading on the Internet that if I don’t pay off my credit card bills in seven years, it’s too late for the credit card companies to sue me for not paying. it’s like the statue of limitations for certain crimes. You’re off the hook.

My wife says that’s crazy and wants me to consult an expert. So that’s why I’m writing you. Is this real or not? I hope it is, because I got something like $12,000 or $13,000 on seven or eight cards. It might even be more now.

— Pete in Delaware

Howard Dvorkin answers…

Questions like this one both sadden and frustrate me. I hear them frequently, and I always reply the same way: A little knowledge can be a dangerous (and costly) thing.

In this case, Pete, you and many other people are confusing two different concepts. First, there is a time limit regarding these debts. Second, it’s called a statute of limitations. Third, it’s not what you think.

Can A Credit Card Company Sue You After 7 Years?

Can a credit card company sue you after 7 years? Credit cards are very complicated and so is the law. When you combine those two things you could easily get overwhelmed. That’s why this question about the statute of limitations is so important.

Here’s the problem, there are dozens of statutes of limitations, each state has their own. They determine how long the collection agencies have to sue you for not paying your debts. After that time, they can’t take you to court, but they can keep bugging you to pay up because your debts haven’t disappeared. Then there’s the Fair Credit Reporting Act, a federal law that says many things, but one of them is this: “most negative items on your credit reports must be removed after seven years”.

So again, the debt is still there but anyone pulling your credit reports won’t see it. I wouldn’t recommend waiting around for years hoping you won’t get sued. That’s a stressful way to live and if you do get sued you could end up getting your wages garnished.

Your best bet is to call a professional now for a free debt analysis. Who do you call? of course!

If you’ve stopped paying your credit card bills, your card issuer will probably sell your debt to a collections agency after six months. That agency now has as few as three years and as many as 10 years to take you to court and sue you for that debt.

Why the big range of years? Because it depends on which state you live in. Each sets its own rules, and those rules can vary in the details. Thus, it’s impossible for me, in this limited space, to list all the variables. assembled this report, which has an interactive map that shows you all the complicated details by simply rolling your mouse over your state.

Now, just because you can no longer be sued for your debts doesn’t mean they’ve gone away. They’re still there.

The reason you’re probably citing seven years, Pete, is yet another rule. This one comes from the Fair Credit Reporting Act, or FCRA. This federal law states that most negative items on your credit report must be removed after seven years.

That doesn’t mean collection agencies won’t still hound you. While they can’t bother you at all hours or make threats — thanks to another law called the Fair Debt Collection Practices Act — they’re not likely to ignore such a large sum.

As you can see, you’re risking a lot by ignoring your debts. If your creditors do sue you, and if they win, you could face wage garnishment. While that’s an extreme, read What Happens If I Stop Paying My Credit Cards? to learn all the scary possibilities.

Before you play chicken with your credit card issuers, Pete, I recommend something else. It won’t cost you anything but some of your free time: Get a free debt analysis from a certified credit counselor. Learn more here. Pete, you might find you have far better options than living several stressful years waiting and wondering if you’ll get sued.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

Can The Government Garnish My Wages Till I’m Broke?

Question: I just received a letter stating my student loan that has been in default is to be offset. I am working. I’m also already facing wage garnishment for child support arrears. I barely make $11,000 a year and they garnish $300 each month for my arrears.

My question is: Can the government garnish my wages at the same time garnishment for my arrears ? Or will they wait until I pay my arrears off? If they don’t do that, I won’t have anything left to live on!

— Angie in Texas

Steve Rhode answers…

You are living through a tremendously stressful situation, Angie. I wish I could wave a wand and make that pressure vanish. What I can offer you is good information and a plan forward.

1. Look into an offset

An offset is typically a tax refund intercept, unless you’re also getting federal benefits like Social Security. The tax refund intercept is easy to deal with — just don’t get a tax refund. You should adjust your withholding, if any, to get more money in your pocket each month and not in a refund check. Thus, you can avoid the IRS intercept and you’ll have more money to cover your expenses each month.

2. Payment plan

Now that’s a short-term solution. For more of a long-term solution on the federal loans, you can get into a $0 per month payment plan that will keep you out of default. In fact, I just recently answered a reader question that dealt with this.

I’m not an attorney. You’d need to speak to an attorney licensed in Texas for specific legal advice, but it appears in Texas you can have up to a wage garnishment that’s up to 25 percent of your disposable income — but not more than 30 times the minimum wage.

If you did get a federal student loan wage garnishment, it would come in the form of a letter and be called an “Administrative Wage Garnishment.” Open it. The letter will instruct you how to appeal the garnishment to hopefully get it suspended.

3. Modification

Texas will allow you to modify your mandatory child support garnishment if you can demonstrate the garnishment doesn’t allow you sufficient income to live on. To modify the garnishment,  talk to the court or a licensed attorney in Texas. Another solution may be to look into debt consolidation, which can include child support arrears.

Thank you for letting me help you find a way forward, Angie.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How Can I Not Freak Out About The IRS And My Back Taxes?

Question: I just got a letter from the IRS saying me and my wife owe $12,000 in back taxes — from three years ago! That’s when we started our business and had my wife’s idiot cousin do our accounting and taxes.  He only did it for a year because he got arrested for a DUI.

So here are my questions:

  • Why did this take three years?
  • What do I do now? Our business is gone and we don’t have six large lying around.
  • Since this was the idiot cousin’s fault, can we send the IRS after him?
  • Do we need a lawyer? Is the IRS going to lien our house?

Help me out here, I’m freaking out. 

— Stan in Maryland

Howard Dvorkin CPA answers…

Let’s start at the end and work our way back to the beginning. First, don’t freak out.

When you think of the IRS, you don’t often conjure up images of helpful people. However, if you go to the IRS web page, What You Need to Know if You Get a Letter in the Mail from the IRS, here’s what it says under the very first item…

1. Don’t panic.

Believe it or not, the IRS isn’t out to get you. It just wants to get paid. So it will actually work with you. The horror stories of the IRS seizing houses to settle back taxes? Those usually neglect one key fact, summed up in this explanation of federal tax liens

Usually, the IRS will only place a tax lien when no effort has been made to resolve a tax debt, despite the numerous letters and notices they have sent.

Even then, you’ll receive a warning that a lien is coming, and you’ll have 30 days to resolve the situation. Since you recently received this letter, you’re in no danger of this nuclear option right now.

Thankfully, “resolving the situation” doesn’t have to mean paying your entire balance on a moment’s notice. As you say, Stan, you don’t have $6,000 laying around. Many people don’t, and the IRS knows that.

That’s why the IRS offers installment agreements. Basically, you pay back the IRS monthly, just like you do a mortgage or credit card balance. Of course, you’ll pay penalties and interest on those installments, so the more you can afford to pay, the less you’ll owe in the end.

As for hiring an attorney, that depends on the complexities of your situation. If you seek what’s known as tax debt consolidation or an offer in compromise, the paperwork can be daunting. However, I’d follow the directions on the IRS letter first and see if you can work out a payment plan that doesn’t kill you.

Finally, about your idiot cousin.

The IRS holds you, and only you, responsible for your tax return. That’s why you sign it — because you’re supposed to review it. In the future, stick with professionals who have a long track record and excellent reviews. Idiot cousins may seem a cheaper alternative, but as you’ve learned, they can cost you later.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

Is It Legal For Debt Collectors To Ring My Doorbell?

Question: Can you settle a bet for me? My girlfriend says it’s illegal for debt collectors to ring my doorbell and threaten me. She says that’s federal law, and they’re not even supposed to call me after dinnertime. She says she even told a debt collector not to call her on Sundays, and they stopped.

But if that’s true, then how come I had my car repossessed on Christmas Day, which was a Sunday and they came in the middle of the night and didn’t even give me any warning?

She also says you can’t go to jail for more than 30 days for being in debt, but what about Bernie Madoff? He ran a Fonzi scheme and got caught when it ran out of money. He got life.

So I think my girlfriend is full of it. Whoever’s wrong has to buy an expensive dinner for the other. So who is it, Howard?

— Andy in Mississippi

Howard Dvorkin CPA answers…

If I understand your question correctly, Andy, your girlfriend may still be dealing with debt collectors — while you’ve had a car repossessed just a few months ago.

Before I settle your bet, I beg you: Settle your debts. I’d worry less about paying for “an expensive dinner” and more about paying expensive interest rates, penalties, and fees.

Financial education can help you conquer your debt

I’ve often written about the psychology of debt, and I see that at work here, Andy. You and your girlfriend have probably struggled with debt for so long, you’ve given up trying to conquer it. I’ve seen many otherwise intelligent people ignore their debts and hope they’ll go away. Of course, they never do. In fact, when debt really piles up, the debt collectors come calling.

There are proven ways to conquer your debts. One of those is financial education. A little can save you a lot, especially in your current situation.

That’s why the answer to your original question is: Neither of you is completely right, but your girlfriend is less wrong.

It’s Ponzi not Fonzi

Let’s start with the obvious. There’s no such thing as a “Fonzi” scheme. It’s Ponzi scheme. The former was the coolest character on the 1970s sitcom Happy Days. The latter was a 1920s crook who popularized the crime of paying investors not with interest on their money, but with money from new investors.

Bernie Madoff got caught when his Ponzi scheme collapsed, but being broke wasn’t why he was sentenced to 150 years in federal prison. He defrauded investors.

Next, let’s talk about the difference between debt collectors and “repo men.” As you can read more thoroughly in the report Can a Debt Collector Come to My House?, there’s a difference between recovering debt and property.

Debt collectors operate under a federal law repo men don’t. It’s called the Fair Debt Collection Practices Act, or FDCPA. Your girlfriend is correct about the law being federal, but she’s wrong about some particulars.

For instance, debt collectors can’t call at night. “Dinnertime” isn’t mentioned. Also, debt collectors can’t call at a time when you tell them you can’t receive calls. However, they can’t call you on Sundays regardless. There’s nothing in the law that prevents them from coming to your home, but it does regulate what they can do when they get there.

Here’s a video that sums up the rules…

Finally, you’re both wrong about being jailed for debt. Before the 183os, you could be sentenced to “debtor’s prison.” These days, as has reported, “if a collector threatens you with jail time, they’re almost always violating the law and you have a right to fight back.

Sorry for the long answer, Andy, but I hope it convinces you to forgo the expensive dinner and consult a debt expert to get help. If you don’t call, I beg you to call somebody.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.