Now that the tax season is behind us; we’re into tax enforcement season. While IRS levies are always a risk when you have an unresolved tax debt, it always seems like the chance of a tax levy increases in both June and December. A conclusion on my part, supported by no empirical statistics; but it seems that in my experience most people seem to be levied while they are just about to pay for that summer getaway or once they received that Christmas bonus.
This summer, I will inevitably have a phone call from someone who owes a tax debt, received a wage garnishment, and were told by their employer that they will be fired if the levy is not released before the next payroll date.
The Internal Revenue Manual (IRM) properly frames this issue in Section 18.104.22.168: “Sometimes an employer threatens to fire an employee to avoid handling a levy”. This is the exact issue at hand as some employers may unfortunately be better equipped to terminate your employment than follow employment and tax regulations.
IRM Section 22.214.171.124 continues to provide that an employer that terminates an employee because the employee received a levy may have violated 15 USC 1674 and that the employer may be fined not more than $1,000 or imprisoned for not more than one year, or both.
In regards to the levy action, this really isn’t good news if you are the employee facing the garnishment and have been threatened with being fired. Because of the way it is addressed by the IRS, there may be punishment for the employer should they actually fire the employee, assuming the IRS levy is the only garnishment. However, the inclusion of IRM Section 126.96.36.199 prevents the taxpayer as using the employer’s threat as a defense to the levy enforcement action.
In regards to the employer’s potential violation, or actual violation, of 15 USC 1674, the IRS is not concerned, and taxpayers facing this dilemma are to contact the Wage and Hour Division of the Department of Labor. In California, California Labor Code Section 2929(b) provides protection to an employee who is actually fired for receiving a wage garnishment.
Unfortunately, an employer who wants to terminate an employer because an employee received a wage garnishment will likely cite other legitimate reasons for doing so. The real solution for the employee is to negotiate a resolution of their tax debt to release the levy as the employer’s threat of termination is not a defense to the collection action.
This article is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.