Wage Garnishment – Knowing How Much of Your Wages Will Be Garnished
Wage garnishment is the process of allotting a portion of your salary, wage, or income to pay off some of your creditors or any other court judgments such as child support and alimony, student loans, or even back taxes. The court is primarily responsible for ordering your employer to deduct a certain amount from your monthly wages to meet your financial obligations. If there are creditors or entities who require wage garnishment, then they have to require a court order for this. However, there are also instances when certain government agencies can issue the wage garnishment provided they inform you well ahead of time.
In Court Judgments
If your creditor will be filing a suit against you in court and you lost the case, you may have to pay the damages awarded by the court. If you cannot pay lump sum, the winning party may have to request from the court to issue a wage garnishment to your employer so that a certain portion of your income will be deducted to pay the court judgment. Understand that federal law states that wage garnishment for court judgments must not be greater than 25 percent of your total take home pay or your disposable income. In some cases the garnishment can be no more than the amount that is left after subtracting your income from 30 times the minimum wage observed by the federal government. For example, if the minimum wage is $7 and you are earning $500 per week, then 25 percent of this is $125. Or, applying the 30x rule, 30 times the minimum wage is $210. Subtracting this from your weekly wage is $290. Technically, your creditors will only be entitled to a wage garnish of $125 which is the lesser of the two.
In Paying Off Student Loans
If you owed the Department of Education some student loans, they can provide you with a notice that they will be ordering a wage garnishment from your employer. They don’t require a court order or a lawsuit for this. You need to understand that the maximum amount of wage garnishment in this instance is 15 percent. The good thing is you can request for a hearing regarding the proposed wage garnishment so you can better plan for your finances as well.
In Child Support Cases and Alimony
For child support and alimony cases, wage garnishment is automatic. However, if the case only involves alimony, then the spouse requesting for alimony may have to request for wage garnishment. If you are not supporting any other family yet, you can expect to give up to 60 percent of your wages; if not, only around 50 percent will be taken. It is also important to understand that if you have accrued arrears in more than 12 weeks, an additional 5 percent is usually garnished.
In Tax Debt Payments
The IRS can also issue wage garnishment to pay taxes you owe. This is highly variable as it can depend on several factors.
Wage garnishment is a process of apportioning a fraction of your income to take care of your financial obligations. It may not seem fair to you but it helps ensure justice to others.
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Removing Wage Garnishment
When you owe money to the IRS, they have aggressive systems in place to force you to pay in full. If you have put off filing your tax return(s) or have an outstanding balance from a previous return, you are in danger of having your wages garnished by the IRS. However, if you aren’t able to pay your tax debt or taxes due in full, you should seek help to negotiate with the IRS. Valley Tax Law wade through the legal process for you, and take control of your liability and expedite it to resolution.
What is a Wage Garnishment?
It is a legal judgment against you requiring your employer to legally withhold money from your wages for tax debt payment. This is an extremely effective process used by the IRS to enforce taxpayer’s to pay their owed taxes.
Before the IRS can attach one of these, the following criteria must be met:
The tax must be assessed and a notice sent to taxpayer
The taxpayer must refuse to acknowledge or pay the outstanding balance
The taxpayer must receive a CP 90 Notice – “Final Notice of Intent to Levy and Notice of Your Right to a Hearing” – sent 30 days prior to the withholding taking effect
Once the IRS completes these, a portion of your wages will be taken as payment for your debt. You do not have to actually receive the notice for it to be legal. The IRS is required only to send it via certified mail to your last known address. Often we find, many taxpayers may not be aware until it actually happens.
Avoid Becoming a Victim
Valley Tax Law (VTL) has successfully represented countless victims of these types of situations throughout California. You need VTL to negotiate with the IRS for alternative solutions, to protect you from rising fines and penalties and, perhaps, the loss of assets.
Once you receive information about the money being taken from you, it is imperative you contact legal help immediately. Prepare to provide all your financial records and past tax information. If you do not have this information, we will get it for you. After reviewing your financial situation, Valley Tax Law tax professionals will determine your eligibility for an alternative agreement with the IRS.
Know Your Rights
Valley Tax Law will contact the IRS on your behalf to discuss your options in person. Using our tax law knowledge and experience with the IRS, we can delay the proceedings. You will be protected from excessive amounts being drawn from your paycheck. If necessary, we will file an appeal if any of the following has occurred:
You have paid your overdue taxes prior to the withdrawal taking effect
You are filing for bankruptcy during the assessment and notice period
An IRS error has occurred
The Statute of Limitations has expired
You did not have the chance to dispute supposed liability
You request a chance to discuss options relating to collection action
You want to defend your spouse
Once your appeal hearing is concluded, we will be notified of the status within 30 days. At that time, we will fully explain your rights helping you understand your options.
IRS vs independent creditor
An IRS garnishment is very different than one by an independent creditor. The IRS can seize property, assets and income. If you are facing one from the IRS, it is extremely important to contact them as soon as possible to discuss the outstanding debt. Hiring the services of a qualified company to represent your rights is a must. Once your income is taken, your assets can be seized and put up for sale at a public auction. Any amount collected will be utilized for the payment of your balance.
Bank Levies / Seizures and how to Avoid Them
Having a bank levy from the federal government or state agencies placed against you can really paralyze your finances. A bank levy may occur if you do not to pay your income taxes or have an outstanding balance from past tax seasons. Again we stress this all the time, but urgency is key. It is important to act quickly if you are unable to pay your taxes in full. The IRS or state authorities will aggressively pursue full payment from you, including seizing income or your bank account.
If you are financially unable to pay your taxes, it is imperative to hire a qualified tax firm to contact the IRS on your behalf before adverse action begins. A knowledgeable firm will advise you of your rights and what to do to avoid having any judgments taken out against you.
What can they legally do in my bank accounts?
As crazy as it sounds, it is completely legal for the IRS to proceed with taking money from your bank account, and freezing your assets until full payment is received. They are not required by law to inform you of this action prior to the judgment. There are a few options that we can talk about that could potentially stop this type of seizure:
Proving financial hardship
Negotiating a payment agreement
Offer In Compromise
Because most people are intimidated by the IRS, they delay resolution putting them at greater financial risk. A tax professional can make all the difference in effectively addressing the IRS. There will be missed opportunities, the cost of time itself, and increased expense and exposure if you try to deal with the IRS by yourself. You want your credit and assets to be protected, and that’s done through a tax attorney.
How can I get my money back?
The bank garnishment can be placed on any type of bank account whether it is savings or checking. The seized money in the account is frozen by the government and confiscated to pay off the outstanding tax debt. If funds are inadequate, the bank account is suspended until the remaining balance is paid. Exempt funds include:
Social Security payments
All other funds in the account are qualified for collection. It is very common practice for the IRS or state agencies like California to garner outstanding tax debts via the bank account seizures. Fortunately under most state laws like here, if you disagree with this, you can file for a notice to contest the seizure. Without the help of a tax attorney you can miss the 30-day deadline to contest.
Rights and Resolutions
Any outstanding monetary transactions made prior to the bank garnishment are invalid and won’t be honored. Your bank is required to return them for “Frozen Account” or “Non-sufficient Funds”. An all too common issue, is when anyone tries to garnish your bank account without your knowledge the bank fees snowball and your financial integrity declines. To protect yourself before your bank account is levied, please give us tax professionals a call to discuss the best options available to you.
Releasing the Penalty
Before going up against the government to try and have your penalty released, here are a few pieces of information that your representative will need to have:
A power of attorney form
Monthly personal/household/business expense report
Any credit card information
A payment authorization form
A copy of the notice of seizure if there is one
A copy of your most recent paychecks with year-to-date earnings included and any bank
Once you have provided your tax specialist with the information and documents above, then they can begin to communicate with the IRS on your behalf.
By forwarding this information in its entirety, you will allow your specialist to begin working on your case. Any omission of information can and will result in a delay and time is money in any instance involving the IRS.
Failure to comply and be forthcoming is only going to result in delays on both ends and will prolong your release being processed. There is some other information you must provide in the event it is needed and this may be a copy of a divorce decree (if applicable), proof of paying child support and the amount being paid (usually three months records is all that is required), medical expenses if they exceed a certain amount, as well as any other information needed to verify validity of monthly expenses.
How to Avoid a Potential Garnishment
Delaying action or ignoring the letters and notices they send is the worst thing you can do. If you are financially unable to meet your obligations, it is imperative that your creditors are contacted to make alternate arrangements.There are many effective actions you can take to avoid having one of these placed on your accounts. To avoid irreparable damage to your credit and financial integrity, it is extremely important to do your best to pay your tax bills on time.
Pay immediate attention to the notices and letter
You will receive prior IRS notices of intent informing you of the amount you owe possible options for resolution, and the time limit in which you must respond before the action occurs. If you ignore this notice and deadline, the government will quickly take action to seize your income.
Once you begin to receive IRS collection letters, you become subject to a potential seizure. You have the right to request a hearing on this matter. At this hearing, evidence will be presented by both sides and a judge will determine the amount of your wages to be taken. Considering your taxable income and number of dependents, you can expect to have a significant portion of your paychecks garnished until the amount is paid off.
What you do not know can affect your future
If you intend to buy a home or go to college at some point in the future, your credit rating should be of the utmost importance. Having your income taken will affect your ability to secure loans to finance your dreams. It will hamper your ability to support yourself and will attach a stigma that will follow you everywhere. It is difficult to recover financially with a history with one of these in it.
Saving time and money
Hiring a tax attorney is a prudent investment. When you handle tax problems alone and unprepared, it opens the door to escalating penalties and fines. You should not delay until your income being taken becomes a reality.
What can I do before my wages are taken?
If you have exhausted all the avenues available and you find a wage garnishment is pending against you, then it is a smart decision to enlist the assistance of a tax specialist. There are many different types of garnishments, and if you are unfamiliar with your rights and responsibilities then you may find turning to a tax specialist is a good alternative than trying to go it alone. You will find that you can get much further having an educated advocate on your side and this will save you time, money and countless hours of frustration.
How to Get One Released
If you have had a garnish placed on your income or accounts, the best course of action you can possibly take is to get in contact with us to know what your options are. This is an area of law that we are well versed in, and work with every single day, so really know how to approach an issue like this.
Taking Care of It Yourself
Many people are tempted to try and take care of it themselves, which is completely possible if you know what you are doing. Just like you can re-wire and re-plumb your house by yourself, tax problems can be taken care of by any individual. But if you want your problem handled by someone with some experience who will handle things right, you will want to get in contact with us. We will do the job right the first time, and get you the freedom you are needing.
You do not have to face the stigma and embarrassment
These types of penalties are quite common and will continue until the entire debt has been repaid to the creditor. They can have a very profound effect on your future and can prohibit you from obtaining loans for a home or college, opening a bank account, as well as the damage done to your reputation and the embarrassment and stigma that are attached.
Frequently Asked Questions (FAQ)
What happens if I have a refund coming?
In the event you are owed a refund this year, the amount will be seized and applied to the remaining balance of the prior tax season.
Everyone has faced financial hardships, but you do not have to deal with it alone. You need not suffer the aggressive and intimidating tactics of the IRS. It is imperative to have a knowledgeable tax attorney protecting your best interests.
How much money can they take from me?
Federal laws require that only a certain amount of income may be withheld in a certain pay period. The figures set up are as follows:
A percentage of the employees after tax income or the amount by which the after tax income is thirty times more than the federal minimum wage
Minimum wage standards vary state by state and the weekly amount cannot go over these two figures.
This figure is based upon a person who receives a weekly pay check, however, if you are paid bi-weekly or monthly, then the amount will be recalculated and based upon that information.
Can I contest it or do I have to accept it?
As with any federal laws, there are exceptions as to what income is taxable or not and you have rights to contest withholding of certain types of income. This income is as follows but not limited to the following: child support, veterans pay, government pension payments, unemployment benefits, public aid, funds in a community or joint account shared with others including a spouse, and various other types of income provided to you by the state. In order to protect this income from being taken, you will need to consult with a tax professional and have them file a document with the courts within 28 days of receiving your garnishment notice.
What else can the IRS do besides take payroll wages?
It is important to note that if you owe money to the IRS, you need to do the best you can to settle it; otherwise the IRS may garnish your wages or levy your bank account. Federal laws not only protect you as a consumer, but also protect the IRS and state agencies. You may be able to avoid legal action being taken by contacting the IRS and working with them to come to some type of agreement, thus avoiding wage garnishments or bank levies altogether. It should be noted that the IRS has a limited amount of time to collect an outstanding tax debt. Certain taxpayer actions may extent the statute of limitations and allow the IRS more time to collect. You must be aware the IRS will continue to seek withholdings until the debt is paid in full. There are no laws around that are going to protect you if you run and try to hide from the IRS, so it’s best to face it head on and be prepared.
What if I have outstanding income tax debt?
If you have failed to file additional income taxes in the recent past, this will also need to be addressed by your tax specialist. This information is also relevant to your IRS wage garnishment release and is detrimental to your situation. Your tax specialist will assist you in getting the appropriate returns and forms filed in a timely manner. This will allow your tax professional to proceed with your release, without this being done you cannot move forward. There are some tax specialists who only deal with the processing of wage garnishment releases and they can prove invaluable to you when dealing with the IRS in these matters.
What happens to my credit rating if my wages are seized?
Chances are that if your wages are seized by the government, your credit rating will go down. Not only does your outstanding debt amount go up, but with a negative event like this on your record, credit agencies definitely dock points on your credit rating.
How can I prevent my credit from being ruined?
It matters which avenue you pursue when trying to come to a workable solution to your tax problem. With the combined penalties and interest added to your outstanding balance, you will find yourself drowning in a sea of debt. Many taxpayers delay seeking help until it is too late. Protect your financial future and hire a tax professional to help you. In most cases, your problems can be resolved with little difficulty. Your peace of mind will be restored.