Can the IRS Garnish 1099 Income? Insights from the IRS Solution Attorney
Hi, I’m Darrin Mish, also known as the IRS Solution Attorney. Today, let’s tackle a question that many self-employed individuals ask: “Will the IRS garnish the income I receive through 1099 relationships?”
Understanding 1099 Income and IRS Levies
If you’re self-employed and receive 1099 forms from various sources, it’s important to know that the IRS can indeed garnish this income. This is known as a contractor levy, and it works a bit differently than a standard IRS wage levy.
The Difference Between Contractor Levy and Wage Levy
In a typical wage levy for W-2 employees, the IRS follows guidelines laid out in Publication 1494, which determines how much of your paycheck you can keep based on your filing status and number of dependents. This levy continues until the debt is paid or the levy is released.
However, with a contractor levy, there’s no such guideline. The IRS can take 100% of your 1099 income until your tax liability is settled or the levy is released. This makes a 1099 relationship an easy target for the IRS and a potentially painful experience for you as the taxpayer.
The Stakes Are High for 1099 Contractors
For many self-employed individuals, their 1099 income is not just a paycheck—it’s the lifeblood of their business. Imagine the financial strain and uncertainty if you suddenly have no income because the IRS has levied 100% of it. This could mean not being able to pay your business expenses, which in turn could lead to losing clients, defaulting on loans, or even shutting down your business entirely.
Unlike traditional employees, self-employed individuals often don’t have unemployment benefits to fall back on in times of crisis. This makes the prospect of a contractor levy even more daunting. The IRS’s ability to levy 100% of a contractor’s income without standard guidelines means that your financial security could be at risk if you don’t address your tax situation proactively.
Handling IRS Levies: A Real-Life Story
One time, during a consultation with a truck driver facing a levy, he asked, “Would it be better if I just quit my job?” I replied, “Well, it depends if you can get another job.” To my surprise, he picked up the phone, called a potential employer, and got hired on the spot. He then called his current employer and quit right there. “Am I done?” he asked with a grin. It was a fascinating moment, but let’s be honest, not everyone has such luck!
For most people, abruptly quitting a job is not a feasible solution. The truck driver’s story highlights the importance of being prepared and having a backup plan, but it’s not a strategy that works for everyone. Not everyone can pivot so quickly to a new job or income source, and it’s crucial to weigh the risks and implications carefully.
Proactive Steps to Avoid IRS Levies
To avoid finding yourself in a similar situation, consider these proactive steps:
The Benefits of Professional Guidance
Working with a tax professional can provide peace of mind and ensure you’re taking the right steps to protect your income and assets. They can help you understand your rights and obligations, negotiate with the IRS, and develop a plan to resolve your tax issues. With their expertise, you can minimize the impact of IRS levies and work towards a more secure financial future.
What Should You Do?
If you’re in a 1099 situation, it’s crucial to address the issue before it escalates. Ignoring it won’t make it go away.
Consider reaching out to a tax professional who can provide personalized advice and strategies tailored to your specific situation. They can help you understand the nuances of tax law, explore payment options, and potentially reduce the financial burden of your tax liability.
Remember, taking proactive steps to address your tax situation can prevent more severe consequences down the road. It’s never too late to seek help and take control of your financial future.
If you have more questions about IRS levies or any other tax issues, feel free to visit our website at GetIRSHelp.com or give us a call at (888) 438-6474, that’s (888) GET-MISH. Remember, it’s better to tackle these issues head-on than to let them snowball out of control.
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