Colorado Wage Garnishment Checklist
What a Colorado Tax Levy Means
A Colorado tax levy on wages is an administrative collection action that the Colorado
Department of Revenue uses to collect unpaid state income taxes directly from your paycheck.
The department does not need to obtain a court judgment or court order before issuing a tax levy.
Why the State Issues a Tax Levy
The Colorado Department of Revenue issues a tax levy after a taxpayer fails to pay state income taxes following earlier collection attempts. After billing notices remain unpaid, the department typically sends a Final Notice and Demand for Payment.
Before the levy begins, the department usually sends a Notice of Intent to Issue Tax Levy to your last known address as a courtesy to allow one final opportunity to pay. Once the levy notice is issued to your employer, it cannot be paused, reversed, or otherwise held for any reason.
How Tax Levies Differ from Consumer Debt
Garnishments
Colorado uses the term “tax levy” for state tax collection rather than “garnishment.” State tax levies operate under different rules than court-ordered garnishments for consumer debts.
The Colorado Department of Revenue generally sets the tax levy at 25 percent of your disposable pay without the minimum wage exemption that applies to consumer debt garnishments. Consumer debt garnishments require a court judgment and are limited to 20 percent of disposable earnings or the amount exceeding 40 times the minimum wage, whichever is less.
What Happens After You Receive Notice
Your employer will begin withholding funds from your paycheck after receiving the levy notice from the Colorado Department of Revenue. Withholding continues with each pay period until you pay the balance in full or the department releases the levy.
Steps to Take After Receiving a Levy Notice
Follow these actions to address the tax levy promptly
1. Review the entire notice carefully to identify the tax year or years involved, the amount claimed as owed, and all deadlines mentioned.
2. Verify that the tax debt belongs to you by confirming the tax year, name, and identifying information match your records.
3. Contact the Colorado Department of Revenue at the phone number listed on the notice to request clarification about the debt and available options.
4. Gather documentation of your current financial situation, including recent pay stubs, bank statements, and proof of monthly expenses.
5. Ask the department about payment plan options that allow you to pay the debt over time.
6. Request information about the total amount owed, including current interest and penalties.
7. Obtain the name and contact information of the staff member assisting you and request written confirmation of any agreements discussed.
Financial Hardship Accommodation
You may request a hardship accommodation review if the tax levy creates genuine financial hardship that prevents you from meeting basic, reasonable living expenses. Submit Form
DR6596 Statement of Economic Hardship and Form DR6597 Waiver of the Statute of
Limitations, along with copies of your two most recent paycheck stubs.
Include contact information and fax number for your payroll department, and ensure all income tax returns are filed before the department will consider your accommodation request. Mail all documentation to Colorado Department of Revenue Collections at the address provided on the levy notice.
Options to Stop or Release the Levy
To stop a tax levy on wages, you must pay the full balance due with a bank cashier’s check or money order. Personal checks and other payment methods cannot be accepted once a levy notice is issued.
Understanding Your Employment Protections
Federal law under the Consumer Credit Protection Act prohibits employers from firing you because your wages are subject to a levy or garnishment for any one debt. The levy also does not mean the state has seized all your assets or frozen your bank accounts.
How Joint Filing Affects the Levy
If you file jointly with a spouse or partner, both paychecks can be levied simultaneously, each at the 25 percent levy rate. Interest and penalties continue to accrue on the unpaid balance while the levy remains in effect.
Additional Collection Actions
The department may pursue additional enforcement measures, including filing liens against your property or seizing other assets. These are separate actions that could occur independently through different notices and procedures.
Common Mistakes to Avoid
Do not ignore follow-up notices from the Colorado Department of Revenue about the levy, payment plans, or next steps. Missing communication deadlines can result in the loss of your right to pursue available relief options.
Provide complete documentation if you request a payment plan or hardship relief, as incomplete applications may be denied and require reapplication. Notify the Colorado Department of
Revenue immediately if you change jobs, as the levy order typically transfers to your new employer.
Keep copies of all pay stubs, correspondence, and notices related to the levy. Report major changes to your employment or income to the department and ask whether modifications are available.
When to Seek Professional Help
Consider consulting a tax attorney or Certified Tax Resolution Specialist if you believe the levy is in error or need guidance on your legal options. Professional assistance can help you navigate complex tax debt situations and determine the best resolution strategy for your circumstances.
Key Differences from Court Garnishments
Tax levies bypass the court system entirely through administrative authority granted by Colorado
Revised Statutes Section 39-21-114. The 14-day objection period available for court-ordered consumer garnishments does not apply to administrative state tax levies issued by the Colorado
Department of Revenue.
Facing State Enforcement or Payroll Tax Issues?
If you’ve received a state tax notice and aren’t sure how to respond, we can help you review your options and next steps.
We help with
- State enforcement actions and notices
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- Penalty and interest reduction options
- Payment plans and compliance solutions
- Representation before state tax agencies
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