💸 Can the IRS undo a wage garnishment?

To give you the short, slightly painful answer first: They can stop the bleeding, but they rarely put the blood back in.

When you enter into an Installment Agreement (a payment plan), the IRS generally agrees to stop hitting you with the stick. They will issue a release of levy, which tells your employer, “Okay, you can stop taking their money now; we’ve come to a truce.”

However, “reversing” it (meaning giving back the money they already grabbed) is a different beast entirely.

The IRS operates on a principle similar to a vending machine: once the money goes in, it really doesn’t like to come back out. If your employer has already sent a chunk of your paycheck to the IRS before the release is processed, that money is usually gone. It is applied to your tax debt, which, to be fair, is where it was going anyway, just faster and more painfully than you wanted.

But can they stop it in the same week? Yes, actually. This is one of the few times the IRS can move with surprising speed, provided you nudge them correctly.

When you set up your Installment Agreement over the phone (which is often faster than online for this specific crisis), do not hang up until you have asked the agent to fax the release of levy directly to your employer’s payroll department.

Yes, fax. The IRS still relies on technology from 1988, and in this specific instance, it is your friend. If they mail the release, it will take days or weeks, and you will lose another paycheck or two in the interim. If they fax it, your payroll department might be able to stop the garnishment before the next cycle runs.

The Exception of Economic Hardship 

There is one Hail Mary play. If the garnishment has left you unable to buy food or pay rent (a situation the IRS calls “economic hardship”), you can ask them to return levied property. You will likely need to argue with a manager or the Taxpayer Advocate Service to make this happen, but it is possible to get the money back if taking it caused a genuine crisis.

Get the agreement. Ask for the fax. And cross your fingers that your payroll department checks the fax machine.

PS: If you have decided that reading about tax regulations on a weekend is a form of mild torture you no longer wish to endure, you can click here to opt out. We’ll miss you, but we won’t hold a grudge.