Wage garnishment law applies uniformly in most circumstances. When a person defaults on a debt, the creditor to whom he owes money can obtain a judgment and a writ of garnishment to collect money owed by garnishing the debtor's wages. Owing back-taxes is no different. If a debtor owes taxes --- whether state or federal --- wages can also be garnished to pay for taxes owed.
Federal Law
The Consumer Credit Protection Act (CCPA) is a federal law that sets limits on the amount of wages a creditor can garnish. According to the CCPA, creditors can garnish up to "25 percent of disposable earnings." "Disposable earnings" is any income left over --- during a pay period --- after mandatory deductions such as Social Security, unemployment and Labor and Industry (L&I) are made. The CCPA also makes it illegal for an employer to fire an employee for the first creditor's garnishment.
Tax Levies
Regarding taxes levies, the allowable garnishment percentage is much higher. In fact, if a tax debtor owes the state in which he resides or the Internal Revenue Service (IRS) back-taxes, up to 80 percent of his wages can be garnished until the debt is paid in full. Additionally, if an employee's wages are insufficient, the IRS can seize bank accounts, pension and retirement plans, and even place a lien against real estate.
Procedure
It is common for the IRS to attempt to work out another way of collecting tax debt before it begins garnishing wages. In fact, wage garnishment is considered the last resort for the IRS. Typically, when a tax debtor is having his wages garnished by the IRS, the IRS has likely sent several notices to the tax debtor before resorting to garnishment.
Considerations
The process for stopping wage garnishment for tax liens differs from other types of garnishment. For example, if the IRS is garnishing an employee's wages, he might be able to work out an alternative payment plan by simply contacting the IRS. This procedure differs from other writs of garnishment, as stopping garnishment where a private creditor has obtained a writ of garnishment involves objecting to the garnishment in court.
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