A wage garnishment is a legal process in which a portion of employee’s earning is withheld by the employer under the orders of the court for the payment of outstanding debt against him. Every problem has solution. Wage garnishment is a tax problem that can be resolved if the taxpayer knows when and where to get help. It is important for a taxpayer who has been issued a wage garnishment by the IRS to know exactly what it is.
A wage garnishment is any legal or equitable procedure through which some portion of a person’s earnings is required to be withheld by an employer for the payment of a debt. Most garnishments are made by court order.
Wage garnishment occurs when a court order directs an employer to withhold earnings of an individual for payment of a debt. Wage garnishments are commonly used for the collection of past due debts, including:
- Credit and Installment
- Federal and State Taxes
- Student Loans
- Child Support and Alimony
What Is a Levy?
The legal seizure of property to satisfy a debt. In the U.S., the Internal Revenue Service (IRS) has the authority to levy an individual’s property, such as a car, boat, house or property belonging to the individual that is held by someone else, including wages. The creditor then takes any future money that you deposit in the account until the creditor removes the levy (usually when the debt is paid off in full).
Difference B/W :Levy and Lien
A levy differs from a lien because a levy takes the property to satisfy the tax debt, If a creditor enacts a levy against you, it means the creditor freezes a financial account and then usually takes money in that account to cover your debt. Whereas, a lien is a claim used as security for the tax debt.
Garnishment of wages: The IRS can demand of an employer that a portion of the wages of a tax debtor be sent directly to the IRS. Section 6334 does allow for an exempt amount that must remain outside of the levy. Tax levies – Wikipedia,
A levy release does not mean you are exempt from paying the balance. The IRS will work with you to establish payment plans or take other steps to help you pay off the balance. To help ensure quick action, please have the fax number available for the bank or employer office that is processing the levy.
Federal law places limits on how much judgment creditors can take from your paycheck. The amount that can be garnished is limited to 25% of your disposable earnings (what’s left after mandatory deductions) or the amount by which your weekly wages exceed 30 times the minimum wage, whichever is lower.
IRS collectors, however, cannot act on their own to seize your house. The IRS must obtain a court order, which you can contest. And you can request help to stop the seizure from the Taxpayer Advocate Service. The IRS doesn’t like publicity about taxpayers losing their homes, so a call to the newspaper might help.
Stop IRS Wage Garnishment
One of the good news is that an IRS wage garnishment can be stopped. It is not automatic and requires some efforts and action by the taxpayer. One of the biggest obstacle for getting an IRS garnishment stopped is having an un-filed tax returns. It is mandatory from IRS that tax payers be in tax compliance with their tax returns before they will consider lifting the wage garnishment. Tax returns requires to be updated for all un-filled tax years.
How The Process Of Wage Garnishment Initiates?
If a debt goes unpaid and ignored , the courts may intervene by issuing a judgment requiring your employer to “garnish” or withhold a portion of your wages to pay back the debt. When wages are garnished, money is deducted from the debtor’s paycheck and sent to the creditor. Garnishment is a legal remedy generally considered a collection tool of last resort. In most states, the garnishment process can only be initiated by a court order. Before the IRS initiates the process of wage garnishment, it first of all send notice to the wrongdoer taxpayer. Notice is send only when the taxpayer fails to initiates a resolution to clear the back taxes owned. Some of the notices to the taxpayers are as given below:
- The IRS assesses the tax and sends out a “Notice and Demand for payment”.
- The IRS sends out a “Final Notice of Intent to Levy and Notice of Your Right to Hearing” 30 days before the wage levy.
Many taxpayers ignore the notice sent to them by the IRS notifying them of the IRS wage garnishment. When these letters are ignored by taxpayer and no action has been initiated by them, they find that their wages will be directly garnished by IRS from their employers. If the employer has notified you that they have received a wage garnishment from the IRS, it is important to get a copy of the same from the employer so that you can fill out the forms in an effort to reduce the amount of money that the IRS will garnish from your earning.
Usually, a form will be included with the garnishment notice that you can use to write your objection and request a hearing. If it is not, you should ask for one from the clerk of the court that sent you the garnishment notice. If the court does not have a form, you should write out your objection to the best that you are able and file it on time. If you want to file an objection contact us quickly or hire an irs tax attorney, so that he can take action on getting the wage levy stopped or released.
You should certainly fill the wage garnishment form otherwise IRS will take a large portion of earning. This form mentioned that a taxpayer with spouse or dependent will have less money garnished than the single person. Having your wage garnished causes financial hardships in one’s life it is advisable to contact a tax professional to help you to resolve the matter.
Who Can Withhold Money Under Wage Garnishment?
Not just anyone can withhold money from your pay check. The only way for an individual, bank, tax authority or anyone else to garnish you is to take legal action against you (though there are several methods of doing so.) In the case of wage garnishment, the most common form, the debt collector must win the lawsuit and be given the right to take this step.
- If you do not show up in court to fight the charges against you, it is likely that the judge will order a garnishment up to the amount the person suing you is requesting.
- Federal limits are in place for wage garnishment. Under wage garnishment laws, no creditors can garnish more than 60 percent of your wages. This is an extreme amount and not often awarded.
- Four states do not allow wage garnishment from creditors, such as credit card companies. Those four states are South Carolina, Pennsylvania, North Carolina and Texas.
Wage Garnishment And Job Security
If the court has ordered for wage garnishment of an employee it does not mean that his employer will fire him from job for single debt. No doubt employer will not hesitate to fire you if you are guilty for two or more debts and garnished separately for each of them. If you think that you have wrongly discharged from job, you can take the help of Department of labors. If the department on enquiry finds that you have been wrongly implicated and your employer is guilty of violation of law strict civil and criminal action will be taken against him and you will be reinstated.
How To Object To A Wage Garnishment?
If you owe a creditor any debt in the shape of loan, hospital bill, or credit card, he will not automatically garnish your wages. First of all he will sue you in the court and get a judgment against you. Thereafter judgment creditor file paper with the court to start garnish process. In this process, you have also the right to written notice and hearing before your employer starts holding your wages to pay to judgment creditor. The court sends you the Notice of Garnishment of Personal Earnings. Once you received the notice, you have a limited amount of time ranging between 30 days to just 5 business days, to make objection over the matter.
Filing A Written Objection To The Wage Garnishment
Garnishment documents that you received from the court should contain instructions on what you must do to object to the garnishment. Those instructions should include:
- The deadline for filing the objection
- Whether that objection must be in writing
- Whether you must use a court-provided form or draft your own written objection
- The type of information your written objection should contain
- Where you should file the objection
- Whether you must also serve a copy of your objection on the judgment creditor and other parties, and
- The date, time and location of any hearing that the court will hold to consider your objection.
If the garnishment papers you received do not contain this information, immediately contact the clerk of the court that issued the garnishment documents to find out this information.
Income Deduction Order And Wage Garnishment
Income deduction orders are most commonly issued in child support or bankruptcy cases. Some states even have restrictions on which courts are allowed to issue income deduction orders. In contrast, wage garnishment is used to satisfy most other types of debt.
Wage Garnishment: How much can the IRS Garnish?
Like other forms of wage garnishment, in this case, the IRS can collect from a person’s earnings to collect federal tax obligations. However, the IRS levy, as it is often called, does not require a court order. You will first receive a Notice of Demand for Payment. Then, a Final Notice is set. A levy notice is sent giving you at least 30 days to make payment. If a taxpayer does not make payment at that point, the IRS will contact your tax attorney to begin the next step. If you have received one of these letters, contact us quickly or hire an experienced IRS tax attorney in Bakersfield, so that we can take action on getting the IRS wage garnishment or IRS wage levy stopped or released.
Maximum Limits On Wage Garnishment
According to Consumer Credit Protection Act ,when the judgment for wage garnishment is notified to the tax attorney, only a certain percentage of wages can be withheld out the total wages of the employee allowing him some income to survive. Also protected from garnishment are deductions that are legally required to be paid by the employee, such as federal, state and local taxes, unemployment insurance, state employee retirement system payments and Social Security payments. However, deductions not required by law (health insurance, union dues) are not protected from garnishment. U.S. Department Law also protects employees by limiting the amount of earnings that may be garnished in any workweek or pay period to the lesser of 25 percent of disposable earnings or the amount by which disposable earnings are greater than 30 times the federal minimum hourly wage prescribed by Section 6(a)(1) of the Fair Labor Standards Act of 1938. This limit applies regardless of how many garnishment orders an employer receives.
So, if an employee nets $1000 a week, under the 25 percent formula, the maximum garnishment amount is $250 (25 percent of $1000). Or, using the minimum wage formula, the maximum garnishment amount is $382.50 (30 times the minimum wage of $7.25 is $217.50, which is then subtracted from the $600 net compensation). Therefore, since the rule says to use the “lesser” amount, the maximum garnishment would be $250.
Most Common Types Of Garnishments You Could Face
Below are mentioned some of the most common types of garnishments you could face. This is not the exhaustive list since garnishments can include other types of debt also.
Child Support Or Spouse Support Garnnishment:
Those who fail to pay court-ordered payments for child or spousal support may face garnishment as a result. In this case, garnishment laws allow for as much as 50 percent of your wages to be garnished if you are supporting another child or spouse (such as being remarried.) However, if you are not supporting anyone else, then up to 60 percent of your wages may be garnished. For those that owe more than twelve weeks of missing payments, this amount can increase by another five percent.
Federal Debt Garnishment:
Those who owe federal debts, including taxes to the IRS, may face garnishment. The government agency or their collectors can get a court order to force you to pay up to 15 percent of your disposable income to cover debts. For tax payers that owe money to the Department of Education, the agency can garnish up to 10 percent of your disposable income, such as for repaying federal students loans that you have fallen behind on.
Each state has its own garnishments law. It is important for you to learn about these laws if you owe money to your state, such as for back taxes. In many cases, the state’s laws are similar to the federal garnishment restrictions.
The Defense Finance and Account Service (DFAS) places judgment and collect garnishments for those in the military. If you fail to pay your debts but receive military pay, the DFAS will collect those funds and distribute to your creditors. This organization also collects debts owed to the Department of Energy, Health and Human Services, Veterans Affairs, the Environment Protection Agency and the Broadcasting Board of Governors. A court order or judgment may be necessary.
What To Do If You Are Facing Wage Garnishment?
If you are facing garnishment, you do have options. Take the following actions
- Find out why you are being garnished.
- Ensure that you do owe the debt you are being garnished for by asking the creditor or other agency for proof of your debt obligations.
- Respond to any legal summons or court details-you need to go to court to avoid wage garnishment. Judges will work with you but if you fail to show up, you will be garnished.
- Talk to an attorney about your options for wage garnishment. You may be able to settle the debt outside of court for less.
Wage garnishment generally will continue until it is stopped by a court order or until the debt is paid in full. Do not wait. Seek help as soon as possible.
– “Garnishment – U.S. Department of Labor.” 2002. 28 May. 2015 <http://www.dol.gov/dol/topic/wages/garnishments.htm>
– “Understanding your CP501 Notice.” 2012. 28 May. 2015 <http://www.irs.gov/Individuals/Understanding-your-CP501-Notice>
– “Final Notice of Intent to Levy-How To Stop IRS From Levy …” 2014. 28 May. 2015 <http://www.ataxlawyer.com/final-notice-of-intent-to-levy-how-to-stop-irs-from-levy/>
– “Notices for Past Due Tax Returns – Internal Revenue Service.” 2013. 28 May. 2015 <http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Notices-for-Past-Due-Returns>
– “Attachment of Earnings Order.” 2013. 28 May. 2015 <https://www.justice.gov.uk/downloads/courts/centralised-attachment-earnings-payment/ae_e0507.pdf>