Garnishments against wages can be levied by any agency and is not limited to the IRS. Private creditors, federal government departments, or even an ex-spouses can claim garnishment of the money overdue. Garnishments can also be in cases of overdue child support expenses. For most agencies apart from the IRS, a court order is required to enforce the garnishment law.
Garnishment is taken as a part of the payroll process. An order of importance been stipulated by law. According the garnishment law, the garnishment due to towards the federal government is to be collected first. Thereafter the money due towards state tax or local tax jurisdictions will be collected, and lastly garnishment for credit cards and other private debts will be paid.
Garnishment law in some states like Pennsylvania, North Carolina, Texas, etc do not allow wage garnishment at all except those related to taxes, child support, court order fines, and federally-guaranteed student loans. Other states allow all kinds of garnishments, even those levied by the private creditors. In some states garnishment law states that a maximum 25% of the disposable earnings can be levied as an amount due towards payment.
The money withheld by an employer from any individual's paycheck is handed over to the creditor or the agency towards which the amounts is due. As per the garnishment law, the wage garnishment remains in effect during each pay period until the total amount due is paid in full. That is not necessarily true in the instance of an IRS wage garnishment. An offer in compromise can be negotiated, or a payment plan can be agreed upon. Most tax professionals can get the IRS to agree to a provisional release of the levy against wages based upon a negotiated agreement.
According the wage garnishment law, an individual's salary, wages, or other income can be levied. Garnishment law prevents the employee from being fired from his or her job. If the employer fires the employee because of garnishment proceedings, then it is violation of garnishment law. The employer can be fined for doing so. The Wage and Hour division of the Department of Labor determines the violation of the law. The IRS does not do this job.
Bank levy is seizure of money lying in the bank account of the tax payer. In all cases of levy, thirty days notice is given by the IRS to the tax payer. This is the final notice for intent to levy and this gives the tax payer a chance to seek relief from proposed action by asking for collection due process hearing.
In the case of bank levy, there is another opportunity as the bank is not required to hand over the money lying in the tax payer's account immediately. The money is required to be paid after twenty one days and this period can be utilized by the tax payer to negotiate with the IRS or work out a plan for payment of tax.
However, while this may lead to relief from future levy action it is unlikely to lead to withdrawal of levy action already taken unless the entire tax debt is cleared immediately.
The silver lining to bank levy is that it is not a continuous levy. Once the money lying in the bank account on the day of the levy is paid up to the IRS, the bank account can be operated normally. Future deposits in the bank account are not required to be handed over to the IRS unless, of course, another levy is done on the bank account.
A wage garnishment, on the other hand, is a continuous levy. The wages of the tax payer are required to be handed over to the IRS on a monthly or weekly basis depending on when it becomes due for payment.
One levy order from the IRS is enough to seize the wages repeatedly every week or every month until the entire taxes are recovered along with interest and penalty. The employer or the bank on which the levy order is served have no choice in the matter.
If the money due to the tax payer is not handed over to the IRS, they are treated as defaulters for the levied amount. In the case of wages, however, the law does not require the entire wages to be turned over to the IRS. Certain amount required for the basic living needs of the tax payer are exempted from the levy.
The tax payer has to furnish information in the matter through his employer. Apart from basic living expenses, the statutory payments such as child care payments or alimony are also exempted. Publication 1494 of the IRS gives the tables for figuring the exempt amounts.
While wage garnishment can spoil a person's reputation at the work place, his employer cannot fire him for this reason. The law provides protection against this. The bank also has to provide all the services as before.
Nevertheless, it is best to avoid the above situation by negotiating a plan of payment of tax dues with the IRS well before the matters go out of hand. You should remember "A Levy is a legal seizure of your property to satisfy a tax debt. Levies are different liens."
Neil Lemons has sinced written about articles on various topics from Legal Matters, Dog Care and Payday Loans. Neil Lemons represents Allied Tax Solutions, a 30 year IRS tax representation firm with ex-IRS agents that help you get your life back. To learn more on. Neil Lemons's top article generates over 6600 views. to your Favourites.