75% IRS Wage Garnishment ??

[2901bruce]

What is the name of your state? CA

Hello,

A buddy of mine (he doesn't have internet access) has told me that his employer was notified by the IRS (via LEVY) that he owes them $7,000 in back-taxes (income/penalties) and to Garnish 75% (WOW) of his income (paycheck).

1) Is this 75% Garnishment legal?
2) What are his options?

Thanks

[seniorjudge]

Yes, there are limits, but if the IRS is garnishing your wages, then that means you have ignored them all along and that you have not co-operated. Better start talking to the IRS today.

[Ladynred]

FEDERAL law sets the MAXIMUM garnishment at 25% of your disposable income. That equals your Gross less mandatory deductions for taxes, etc. It does NOT allow for VOLUNTARY deductions such are 401K's and medical benefits.

[2901bruce]

Originally Posted by Ladynred

FEDERAL law sets the MAXIMUM garnishment at 25% of your disposable income. That equals your Gross less mandatory deductions for taxes, etc. It does NOT allow for VOLUNTARY deductions such are 401K's and medical benefits.

Hello.

If the Fed max garnishment is 25% - How can they take 75% of his bi-monthly pay ?? He doesn't owe child support. Just 7K to the IRS.

[garrula lingua]

If I remember correctly, 25% is for normal debtors.
IRS & child support have higher deduction rights.

The back of the garnishment order states how much can be deducted (it's the instructions to the employer as to what type of garnishment it is, and how much can be deducted).

OP: your 'friend' had the opportunity to send info regarding his dependents to lessen the deduction (does he have dependents ? he may still be able to do so).
Also, he could have made arrangements with IRS for monthly payments before it got to the point of a garnishment.....
It may be easiest to borrow the money to live on or get a 2nd job, and let IRS keep deducting - they'll get their money some way.
The alternative is to see a tax atty (should have been done earlier) and see if s/he can get the garnishment lifted and the amt reduced.

[garrula lingua]

PS: do to:
[url]http://www.courtinfo.ca.gov/cgi-bin/forms.cgi[/url]

go to Wage Garnishment, then to Wage Garnishment for Taxes and read the instructions to the employer.

[Ladynred]

Federal Wage Garnishment Law
[url]http://www.dol.gov/esa/regs/compliance/whd/whdfs30.htm[/url]

What are the restrictions on wage garnishment?

The amount of pay subject to garnishment is based on an employee's "disposable earnings," which is the amount left after legally required deductions are made. Examples of such deductions include federal, state, and local taxes, the employee's share of State Unemployment Insurance and Social Security. It also includes withholdings for employee retirement systems required by law.

Deductions not required by law - such as those for voluntary wage assignments, union dues, health and life insurance, contributions to charitable causes, purchases of savings bonds, retirement plan contributions (except those required by law) and payments to employers for payroll advances or purchases of merchandise - usually may not be subtracted from gross earnings when calculating disposable earnings under the CCPA.

The law sets the maximum amount that may be garnished in any workweek or pay period, regardless of the number of garnishment orders received by the employer. For ordinary garnishments (i.e., those not for support, bankruptcy, or any state or federal tax), the weekly amount may not exceed the lesser of two figures: 25 percent of the employee's disposable earnings, or the amount by which an employee's disposable earnings are greater than 30 times the federal minimum wage (currently $5.15 an hour).

For illustration, if the pay period is weekly and disposable earnings are $154.50 ($5.15 X 30) or less, there can be no garnishment. If disposable earnings are more than $154.50 but less than $206.00 ($5.15 X 40), the amount above $154.50 can be garnished. A maximum of 25 percent can be garnished, if disposable income earnings are $206.00 or more. When pay periods cover more than one week, multiples of the weekly restrictions must be used to calculate the maximum amounts that may be garnished.

What about child support and alimony?

Specific restrictions apply to court orders for child support or alimony. The garnishment law allows up to 50 percent of a worker's disposable earnings to be garnished for these purposes if the worker is supporting another spouse or child, or up to 60 percent if the worker is not. An additional 5 percent may be garnished for support payments more than l2 weeks in arrears.

Are there any exceptions to the law?

The wage garnishment law specifies that the garnishment restrictions do not apply to certain bankruptcy court orders, or to debts due for federal or state taxes.

If a state wage garnishment law differs from the CCPA, the law resulting in the smaller garnishment must be observed.

Sounds to me like your buddy better get a 2nd job. The other alternative would be to find himself a Taxpayer Advocate ASAP and see if he can negotiate a payment plan or an Offer in Compromise.