Having your wages garnished by the IRS, or other entities, is an awful event that can carry significant ramifications on your standard of living, credit score, and other aspects of your life. You may be wondering, “Who exactly possesses the legal authority to garnish my wages?” You may also be asking, “How will I know your wages are going to be garnished before my paycheck is lower than expected?” These are important questions that need to be answered sooner rather than later. With that in mind, this blog attempts to provide an overview of what to expect in a wage garnishment situation, including a wage garnishment initiated by the IRS (assuming your efforts are not successful).
Multiple Entities Can Garnish Your Wages
In responding to the first question about who exactly can garnish your wages, the answer may surprise you. Multiple public and private entities possess the ability to pursue a wage garnishment. Here is an overview of just a few:
- Internal Revenue Service (IRS)
- State tax agencies
- Debt collectors hired on behalf of banks and credit card companies
- Debt collectors hired by federally-backed student loan companies
- People and government agencies to whom you owe child support or alimony
Wage Garnishment Process
For any of the entities listed above to actually gain access to your checking account, or other accounts, to initiate a wage garnishment, there is a legal process that must be followed. A debt collection lawsuit will need to be filed against you in a court of law, which includes a lawsuit concerning the collection of unpaid taxes.
If you take no action in response to that debt collection lawsuit, then the entity will seek a formal court order authorizing the wage garnishment and ability to collect on the judgment awarded in court. Once a wage garnishment is issued, the debt collector will receive the money deducted from each paycheck until the debt collection judgment is paid in full.
Cap on Amount of Wages That Can Be Garnished
As mentioned, if a creditor obtains a judgment against you, they can pursue a garnishment of your wages to collect payment. However, it is worth noting that there is a federal law that places a cap on the amount of wages that may be garnished in a pay period. Specifically, a garnishment is limited to the lesser of 25 percent of your disposable income or the amount of income you have beyond 30 times the federal minimum wage.
There are also wage garnishment limitations on the state level. However, the exact limits vary state by state. As a result, you should speak to an experienced tax debt relief professional who can advise you on the applicable garnishment limit in your state of residency.
Income Exempt from Garnishment
It is important to understand that, even if a garnishment order is initiated, not all of your wages will be garnished. Garnishable earnings only include income from the following:
- Hourly wages
- Commissions
- Rent payments,
- Investment income (e.g., dividends)
This means any income you receive from government assistance programs such as social security, VA benefits, and certain retirement payments (e.g., military pensions) are generally not subject to wage garnishment. In addition, IRS wage garnishments take into consideration your living expenses.
Have Questions? Contact the Knowledgeable and Reputable Tax Debt Professionals at Anderson Bradshaw Tax Consulting Today
If you received a notice from the IRS alleging you owe unpaid taxes, now is the time for action. Contact the respected taxrelief consultants at Anderson Bradshaw Tax Consulting for assistance. With over three decades of experience in the industry, we have seen almost every tax issue and have learned the best ways to handle each situation. You can feel confident knowing your struggles and difficulties with the IRS can be resolved and corrected quickly and efficiently.
For further information or to schedule a consultation, please contact Anderson Bradshaw at 877-550-3911 or visit www.AndersonBradshawTax.com to learn more.
