NOTE: This article is not about when the IRS garnishes your refund for back child support. For information on that topic, go here. This article is about what to do when you have both IRS and child support garnishments on your paycheck and you have difficulties meeting your obligations.
If you have an IRS garnishment, you can request it be removed so that you can pay for necessary living expenses…like the water bill. I'll tell a true story (names changed) of one of our clients who was completely unaware of the solutions available to a taxpayer who is getting garnished for child support and for IRS back taxes.
Meet Bob Stevens, he has a tax problem.
Bob split-up with his ex-wife in 2008. As part of the divorce decree, he was required to pay $500 a week in child support. Prior to that, Bob had run up a huge tax bill when he liquidated his 401(k) and attempted to flip houses. That didn't work out so well, and by 2010 he owed $100,000 to the IRS. Bob was able to find work at one of the defense companies in Connecticut, but is was a far cry from what he made years ago. Worse, he fell into a depression and stopped communicating much with the outside world.
One thing lead to another, and because he didn't respond and make proper payment arrangements with his ex-wife and the IRS, his paycheck ended up being garnished for both child support and the IRS. With everything levied, Bob was left with a net pay of $192.31 each week to live on. Luckily for Bob, his sister Cara, who he was living with, was concerned that Bob would be dead soon if he kept on living like this. She knew that there had to be something that could be done. So she called us and said she would be bringing her reluctant brother to meet with us.
Bob was initially reclusive but then opened up. He admitted he was heartbroken by the divorce and was so ashamed of his tax problem he couldn't even bear to see his kids. He felt like the worst person in the world; that he let everyone down.
We told him he wasn't alone and we could help him out of this. With his sister acting as his coach, we came up with a plan to get his levies removed. We then explained to the IRS that because of the $500 child support levy, Bob could not meet his basic living expenses. Additionally, he would never be able to move out of his sister's house, where visits with his kids were difficult. We proposed a $100 month Partial payment installment agreement, and the IRS agreed.
Bob's life started to improve. He was performing much better at his job and got a huge raise. Bad news, he thought — the IRS would just seek more from him. So he called us again.
We looked at the child support guidelines in Connecticut and found that with his new raise, Bob should be actually making child support payments of $800 a week. We suggested to Bob to tell his ex-wife to request an increase in the child support order. Bob thought this was crazy — why would he want to pay her more? We told him that he could either give an extra $400 per week towards his kids' benefit or an extra $400 a week for the IRS benefit.
He thought about what we were saying for just a few seconds and agreed to tell his wife to request an increase in child support. A few months later, the request was granted. We then went to renegotiate the installment agreement with the IRS. As we looked at his allowable expenses, and saw that the child support was going to continue for another seven years, we realized that Bob now qualified for an Offer in Compromise.
We were able to negotiate this tax debt down substantially, and Bob paid off the tax debt with money borrowed from his sister.
Bob tells me he feels like his old self. His ex-wife was able to move into a much nicer place with his kids, and he doesn't feel quite so pushed around any more. In fact, he tells me there is another promotion that he is on the short list for.
All because he listened to his sister who knew something could be done about Bob's IRS and child support garnishment.
