Wage garnishment is when your employer is legally mandated to withhold a certain amount of money from your paycheck (i.e., garnish) and send the withheld portion directly to your creditor or the person you have a delinquent debt with. Wage garnishment from your paycheck and payroll will continue until the debt is paid in full or when the debtor releases the garnishment. Consumer debt, child support, and student loans are the most common reasons for wage garnishment.
Wage garnishment orders are issued after the creditor presents a court order to your employer, permitting the garnishment of your payroll to satisfy your outstanding debt. In general, it is rather difficult and uncomfortable for most employers to comply with wage garnishment mandates. In any event, by law, an employee cannot be disciplined, retaliated against, or terminated, because their paycheck wages are garnished for child support payments or any other type of debt. An employer must receive a minimum of 30 days’ notice before the garnishment is set to begin.
Wage vs. Non-Wage Garnishments
With a wage garnishment, creditors can legally require your employer to withhold part of your earnings to pay off your debts. n the other hand, a nonwage garnishment or IRS Bank Levies is when creditors can take money from your bank account. Keep in mind, the Internal Revenue Service (IRS) can pursue either a wage garnishment or a IRS bank levy, depending on the circumstances.
Types of Debt Subject to Wage Garnishment
Creditor Garnishments: If you owe money to a creditor and cannot pay the debt, they can turn around a sue you. If the creditor prevails in the lawsuit or receives a default judgment (typically because you failed to appear in the lawsuit,) the creditor can serve you with a court order to garnish your wages.
Child Support & Alimony:If you fall behind on your state-ordered child support or alimony payments, your paycheck can be garnished to pay the required child support.
Student Loans:If you fail to pay your student loans in a timely manner, the U.S. Department of Education and other federal student loan servicers may garnish your wages. Neither a lawsuit nor a court order is required for wages to be garnished for defaulted student loan debt.
Tax Debts:State and federal tax authorities have their own limits for wage garnishment for back taxes. The IRS will issue a “FINAL NOTICE OF IRS COLLECTION ACTION” before issuing a wage levy on the taxpayer’s account. The wage garnishment will continue on the taxpayer’s paychecks until the employer receives a garnishment release from the IRS via fax or mail. The wage garnishment can be for back taxes.
Income Withheld Through Wage Garnishment
Different garnishment rules apply to each type of garnishment. Specifically, according to federal law, there are maximum limits to how much can be garnished from an employee’s paycheck.
Consumer Debt:This debt category includes credit card and medical bills, personal loans, and most other consumer debts. Creditors in this category can garnish up to the lesser of 25% or the portion of the employee’s weekly income, which exceeds 30 times the federal minimum wage.
Child Support: By law, up to 50% of an employee’s disposable earnings can be garnished to pay back child support. If the employee is currently supporting a spouse or child, they are not subject to the current order at issue. If the employee is not currently supporting a spouse or child, up to 60% of his/her paycheck can be garnished. If the employee is more than 12 weeks in arrears with child support payments, these rates may go up 55-65% percent.
Tax Debt: Notably, the IRS determines the amount owed based on the number of dependents the employee has and employee claims coupled with their standard deduction amount. State taxing authorities have their own methods for determination, which vary from state to state.
What Can You Do About Wage Garnishment?
Object the Garnishment: If you do nothing when you receive a wage garnishment notification, the garnishment typically begins 30 days after you are notified. However, keep in mind that you always have the option to object to the garnishment. If you have a valid object, you should immediately file a written objection to the court’s garnishment and request a hearing.
Typical Wage Garnishment Objections:
- - The Creditor is Collecting Too Much Money
- - The Creditor Did Not Follow Proper Procedures
- - The Creditor Was Already Paid
- - The Underlying Judgment is Invalid.
Suppose the wage garnishment is from the IRS. In that case, it can be released by full payment of tax, presenting financials showing an economic hardship, setting up an Installment Agreement (IA), partial pay Installment Agreement, or the Currently Non-Collectible Status.
In a limited case, filing for bankruptcy can stop wage garnishment altogether. However, you should be aware that bankruptcy does not stop the garnishment of child support, tax debt, or other non-dischargeable debts. When you file for bankruptcy, the court will implement an automatic stay. This stops most collection activities, including wage garnishments, as long as the stay is in effect.
How Lifeback Tax Resolves Garnished Wages:
Our experienced team of tax professionals consists of tax attorneys, Certified Public Accountants (CPA), Enrolled Agents (EA), and Certified Tax Resolution Specialists (CTRS) who can release wage garnishments in as little as 24-48 hours of service initiation. Our tax team works with debtors diligently to release your garnishment and takes it a step further by preventing all future collection actions on your file. We aim to work out a permanent case resolution to resolve your tax debt once and for all.
Wage Garnishment FAQs
A wage levy, or garnishment of wages, may be stopped if other arrangements are made to pay the overdue taxes, the amount of overdue taxes is paid, or the levy is released.
The IRS may release a levy when:
• the amount owed is paid
• the period for collection has ended
• you enter into an installment agreement with terms to release the levy
•the levy creates economic hardship, or the value of the property is more than the amount owed and releasing the levy won’t prevent the IRS from collecting the overdue taxes.
The IRS will contact your current employer with the levy information. Your employer will determine the amount of wages exempt from the levy. Your employer will provide you with a Statement of Dependents and Filing Status to complete. After completion, your employer will withhold a certain amount of wages to satisfy the levy.
Yes. It is possible to set up a payment plan, settle your tax debt, or make other payment arrangements with the IRS.
The amount of wages exempt from garnishment depends on a number of factors including your filing status, number of dependents, and other factors.
There may be significant penalties for employers who ignore garnishment orders.
No. Generally an IRS levy is not public record and is not reported to the credit bureaus.
Likely no. An IRS levy is not public record and is not reported to the credit bureaus.
Garnishments may be looked up through a search of court records and/or found through credit reports.
Likely, yes. Changing employers is not an option to avoid garnishment.