IRS Wage Garnishments & You

June 28, 2019

We’ve discussed IRS wage garnishments on our blog in the not-too-distant past. As you may recall, garnishments are legal orders which allow a creditor to forcibly seize assets from a debtor. Or, in legal terminology, they allow a plaintiff to forcibly seize from a defendant. In the vast majority of cases, garnishments involve seizing wages directly from the employer of the debtor. This is referred to as wage garnishments. Wage garnishment is very common, but garnishment can also involve seizing property from another source. At MCC, we deal with garnishments related to back tax debt on a regular basis. There are rules and regulations which pertain specifically to IRS wage garnishments for tax debt. Grappling with all of the ins and outs of garnishment is no easy task. This is true both for garnishments of tax debt and of other types of debt as well.  

In this post, we will discuss a few of the finer points about garnishments here in the U.S. Hopefully, these new facts will supplement the information we’ve already provided about these legal orders. If you find yourself slapped with an IRS wage garnishment order, the last thing you want to do is panic. Keep you cool and reach out to a qualified tax professional for assistance. 

Common Reasons for IRS Wage Garnishments

There can be many, many reasons as to why a garnishment order may be pursued. Or, to put it differently, there can be many kinds of debts which can ultimately lead to a garnishment order. However, the debts which most regularly lead to garnishments are child support, federal student loans, unpaid court costs and, of course, unpaid taxes. 

Garnishments Negatively Impact Credit Score 

Many people assume that IRS wage garnishments merely affect the assets of the debtor and nothing else. But this is a mistaken assumption. Garnishments also can affect the credit score of a debtor. This makes intuitive sense. That’s because garnishments are typically a “last resort” measure when other measures have been exhausted. Garnishments are in some sense demonstrating the ability of a given person to repay his or her obligations. The precise impact of a garnishment order on a person’s credit score isn’t always predictable. But in most cases it’s comparable to other significant events, such as bankruptcies or tax liens.  

Some States Limit Wage Garnishments 

In almost all states in our country, there are no restrictions on garnishments. This means that virtually any creditor or plaintiff can attempt to satisfy a debt via a garnishment order. However, there are currently a few states which have limitations on IRS wage garnishments. Currently, Pennsylvania, North Carolina, South Carolina and Texas have heavy restrictions on these garnishments. In these states, a person’s wages cannot be subject to garnishment except to satisfy a short list of specific types of debt. Tax debt, federal student loans, child support and court-ordered fines may still be satisfied via wage garnishment. But any other type of debt may not be settled with a wage garnishment order. The purpose of this is to protect the ability of citizens to take care of their basic financial obligations and living necessities.  

Minnesota and Florida also impose restrictions on wage garnishments, but the restrictions are a bit less severe than in these 4 other states. 

There is a Federal Limit on Garnishments 

As one might expect, if a person’s wages become subject to garnishment, there is a limit to the percentage which can be extracted. The federally imposed limit is the lesser of two amounts. The amounts are (1) 25% of disposable earnings, and (2) the amount by which a person’s weekly wages exceed 30 times the federal hourly minimum wage. Creditors cannot just take a huge chunk of a debtor’s paycheck every week. The debtor can keep a certain portion of his or her earnings to cover necessary expenses. Some states have their own limits on garnishments which are even more favorable to debtors. In these states, debtors can keep a higher percentage of their earnings than is mandated by federal law. 

Employers Cannot Terminate Due To IRS Wage Garnishments 

This fact will probably come as a relief to many readers. Many people worry about how an employer may view someone who receives a wage garnishment order. Understandably, many are concerned that this will reflect negatively upon them and that their employer may either demote or terminate them in response. As it turns out, employers are actually prohibited by law to terminate an employee specifically in connection with a garnishment order. In other words, your employer cannot just fire you if you receive a garnishment. Your termination would have to have some other, independent justification underlying it. Employers who violate this law can be punished with a fine of $1,000 and up to 1 year in prison. 

Call Mackay, Caswell & Callahan Today!

At Mackay, Caswell & Callahan, P.C., we are committed to helping our clients resolve their financial issues and rebuild their future. We deal with a variety of tax related cases, but focus on tax debt resolution. As we’ve seen, our law has many protections built into it for the benefit of citizens. But, even though that’s true, IRS wage garnishments can still be quite intimidating. If you receive a garnishment, you shouldn’t hesitate to reach out to an experienced tax professional. Contact one of our top New York City tax attorneys and he or she will be able to assist you with this issue. 

Image credit: Creditdebitpro 


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