Tax garnishment, or wage garnishment, is a term we all fear from a distance. We know how difficult it feels to have the very weight of something you did not expect in your wildest dreams.
Regardless of the fact, you should start digging through the details of what state tax garnishment rules well in advance to avoid surprises.
Until now, you probably just thought that wage garnishment meant losing a percentage of your paycheck. What you may not know is that wage garnishment can hemorrhage your finances, drain your savings, and derail your credit score.
However, every bad day is lined with a good one. In this case, it is possible to stop wage garnishment, but it won’t happen overnight.
So, what’s the underlying secret? That’s what this blog answers. Keep reading until the last to learn how state tax garnishment works and how to stop the garnishment permanently. Let’s dive in!
What is Wage Garnishment?
If you’re a taxpayer, you already know that “tax garnishment” is nothing but bad news. But, what exactly is it? In simple words, wage garnishment is a legal order or action from a government body, typically the Internal Revenue Service (IRS), to the employer to deduct a stated amount from each paycheck issued to the taxpayer.
This implies that you might be taking home less than you usually do for a certain period when a garnishment order is placed against you.
There are usually two types of garnishment:
- Wage garnishment: Your employer may legally be ordered by your creditors to deduct a specific portion of your income to settle your debts.
- Non-Wage Garnishment: In order to collect the debt, creditors may also take funds straight out of the debtor’s bank account. This is known as a bank levy.
Read More: How to Write a Letter to Stop Wage Garnishment?
How Much of Your Wages can be Garnished?
You must be wondering, can the IRS take my entire paycheck? The answer is no. Here’s an overview of the federal limits on how much of your disposable income can be garnished for different types of debts.
| Type of Debt | Percent of Weekly Disposable Income |
| Credit cards, medical bills, personal loans, and most consumer debts | Either 25% or the amount by which your weekly income surpasses 30 times the federal minimum wage (currently $7.25/hour), whichever is less. Breakdown: • If weekly income is $290+, max 25% can be taken. • If income is between $217.51-$289.99, garnishment is the amount above $217.50. • If income is $217.50 or lower, garnishment isn’t allowed. |
| Child support and alimony | Up to 50% if supporting another child or spouse; up to 60% otherwise. If more than 12 weeks late, an additional 5% may be taken. |
| Federal student loans | Up to 15% of your disposable income |
| Taxes | Determined by the IRS based on filing status and number of dependents. |
Bonus: Can a Creditor Garnish My Wages After 7 Years?
IRS Garnishment Vs State Garnishment
Wage garnishment is a method the IRS and state authorities use to recover unpaid taxes. However, the specific rules, tax types, and garnishment processes differ, which can be better understood below:
- What Entities Execute the Law: IRS garnishment is imposed by the federal level, which is the Internal Revenue Service. In contrast, state garnishment is carried out in every state by its respective tax bodies.
- Tax Component: For IRS garnishment purposes, federal taxes on an individual’s income are the point of interest in a given year. State garnishment, on the other hand, concerns unremitted state levies such as income or property taxes.
- Garnishment Policy: Federal laws on significant debt apply nationwide, across all forty-eight states. For wage garnishment, no state can set its maximum limit lower than the federal standard of twenty-five percent of disposable income, though each state has its own policies and caps on garnishment levels.
- Possibility of Appeal: When it comes to debt garnishment by the IRS or state tax authorities, there are options to appeal, negotiate an installment plan, or resolve related debt issues. However, these options vary by region and are not universally applicable.
When Will State Tax Authorities Consider Garnishment?
State tax authorities generally consider garnishment as a last resort, after repeated attempts to collect overdue taxes have failed. If you have missed multiple payments, ignored notices for a long time now, or failed to make any effort to resolve the tax debt, you will have to face a tough time with the authorities.
Before garnishment starts, tax authorities issue a series of warnings, including formal notices. If you fail to respond or work out a payment arrangement by then, they will ultimately take more aggressive measures. Which, in this case, is a wage garnishment.
The timeline for state tax garnishment varies from state to state, but it typically follows a pattern of escalating notifications:
- Tax Bill Issuance: In the event that a tax payment is not made by the specified due date, a tax bill will be issued government-wise indicating the tax amount that is due together with any penalties and interests included.
- Initial Collection Notices: Initial reminders are sent to a taxpayer about a ceased debt status and how to pay off such debt.
- Final Notice of Intent: A tax authority’s letter, “Notice of Intent to Levy CP90/ CP91,” would be sent, which warns that if actions are not taken within 30 days, wage garnishment will be enforced.
- Garnishment: If one ignores those notices or refuses to make paying arrangements, the tax authority starts drawing from one’s salary or their bank account.
What are Considered Earnings for Wage Garnishment?
All monetary income earned through the provision of services is subject to wage garnishments. Here are some of the most common types of income that can be subjected to garnishment:
- Wages and Salaries: Unless you are an independent contractor, the compensatory sum paid to your employer regularly for their rendered services, be it monthly, weekly, hourly, or even on a commission basis, is generally classified as earnings.
- Overtime Pay: Any additional earnings that you gain from extending your standard work hours would also fall into wages that can be garnished.
- Tips and Gratuities: For example, workers in hospitality or other service industries earn not only salaries but also tips or gratuities from customers. These additional earnings are considered part of their income and may also be subject to garnishment.
- Self-Employment Income: If you work as an independent contractor, your reported income or the net profit could be subject to garnishment. State tax garnishment rules may apply here, allowing authorities to garnish your net profit directly.
- Severance Pay: If for one reason or another, you have to leave your place of work and they offer you compensation for separation or redundancy, this amount can also be garnished since you have outstanding debts.
State Tax Garnishment Rules by State
State tax garnishment rules can vary significantly, with each state offering different levels of protection for debtors.
Here’s a breakdown of key state tax garnishment rules for various states:
Florida
In Florida, household heads who make less than $750 weekly cannot have their wages garnished. This is a great advantage for low-income earners in Florida.
New York
New York is considered the best because even under wage garnishment, they do not allow taking more than 10% of gross income or 25% of the disposable income of the debtor.
Washington
Washington legislation requires you to be served with a wage garnishment notice at least a month before it is executed providing an opportunity to oppose it.
North Carolina, South Carolina, Texas, and Pennsylvania
In these states, the greater portion of debts are exempt from garnishment with the exceptions of child support, taxation duties, and educational loans. This means that they enjoy reasonable wage garnishment abuse from other forms of debt.
Ohio
There is a regional law in Ohio that stipulates that people cannot be granted their incapacity wages without a court order. This makes it harder yet for those who wish to proceed to wage garnishee.
District of Columbia
This District of Columbia has a provision to safeguard debtors in such a way that forbids any wage garnishment if the disposable income per week falls below forty times the highest minimum wage ($15/hour in D.C.).
California
In California, one’s disposable income can only be garnished by a maximum of 25% unless there is more than one judgment against the party in which case the limit is 50%. This provides some level of protection but because of the risk of multiple debts, the garnishment threshold may still be high.
Illinois
Strikingly Illinois does not deviate from the federal limits for garnishment since it caps garnishment at twenty-five percent (25%) of an individual’s disposable income.
Georgia
As provided by Georgia Law, the maximum period for garnishments shall be one hundred eighty (180) days and a further extension or renewal can be granted if the debt remains uncollected. This implies that the garnishment can also be longer depending on the situations
How to Stop State Wage Garnishment?
By taking these steps, you can work towards stopping or reversing state wage garnishment:
Negotiate with the Creditor
The first step you can take is to try to reach an agreement with the creditor who is seeking to garnish your wages. You can open a line of communication to discuss alternative payment options that may be less burdensome than garnishment.
File a Claim of Exemption
Another option is to file a claim of exemption, which could stop or reduce the garnishment based on your unique financial situation. For example, many states provide an exemption for heads of households who support dependents, such as children or elderly parents, which could help reduce the garnishment amount.
Explore Payment Options
Setting up an installment plan helps you avoid the tax garnishment. This may allow you to pay off the debt in smaller, manageable payments. If this option does not go out well, Offer in Compromise can provide some breathing room.
Challenge the Garnishment
Your wage garnishment attorney may assist you in objecting to the garnishment or appealing it in court if necessary. This may include demonstrating how the garnishment is unwarranted or seeking to reduce the amount garnished.
Consider Bankruptcy (If Necessary)
If all the other alternatives are not viable, bankruptcy can be the last option for stopping wage garnishment and wiping out particular obligations. Nevertheless, a legal practitioner’s advice is very important before one pursues this course of action.
Consequences of Non- Compliance with State Tax Garnishment Rules
Here are six potential consequences of non-compliance with state tax garnishment rules:
- Fines and Penalties
Employers who fail to adhere to state tax garnishment rules may face monetary fines imposed by state agencies for non-compliance. - Legal Action
Employees or creditors can file lawsuits against non-compliant employers, leading to costly legal battles and reputational damage. - Liability for Unpaid Amounts
Employers could be held financially responsible for the garnished wages that were not properly deducted and remitted. - Loss of Business Licenses
Persistent non-compliance can result in the suspension or revocation of a business’s license, severely affecting operations. - State Audits and Investigations
Non-compliance may trigger audits or investigations, consuming time and resources and potentially uncovering additional violations. - Damaged Reputation
A publicized violation can harm a company’s reputation, affecting its relationships with employees, customers, and partners.
Maintaining compliance with state tax garnishment rules is essential to avoid these risks and ensure smooth business operations.
