Garnishment, Municipal Tax Debt, Incorporation

[scyllacharybdis]

What is the name of your state (only U.S. law)? Virginia

Hello, due to a medical crisis I owe municipal taxes (real property, some state and no federal) and a lien and property seizure has been placed on my primary residence (the lien is less than 5% of the market value of my property). While I am cash poor and land rich, my years of not having an income has removed the option of securing conventional financing. Meanwhile, the county says they will not negotiate a payment plan, and are anxious for me to have any bank accounts at all so they can garnish them. I feel that I am now recovered to the point where I can work off my debt and require advice about how best to proceed.

A) Is my understanding correct that wages from employment are subject to garnishment to a maximum of 25% if the annual salary is beneath the median income?

B) Is it correct that if self-employed--all monies in all bank accounts (personal or business) are considered "receivables" and thus 100% subject to garnishment?
B1) Are loan proceeds and grant awards also considered "receivables"?
B2) Does 100% garnishment also mean that I would not have the funds to pay self-employment tax--and thus would have also created a federal tax problem for myself in attempting to resolve a municipal one?
B3) If I have a job and a sole proprietorship, would the remaining 75% of my employment wages also be subject to garnishment?

C) I am a single, minority, woman independent artist with no children who receives no public assistance. Is it in my best interests to form a corporate entity for my business activities--to protect my means of continuing to generate income and pay new taxes as they are incurred, while paying myself a salary which would be subject to garnishment for the repayment of my debts?
C1) As an employee of my corporation, would a maximum of 25% of my wages be subject to garnishment (if the annual salary is below the median)?
C2) As good fortune and effective work allows me to do so, could I then assign myself bonus compensation to be used to further reduce my debt?

Thank you very much for your expert time and consideration!

 

[LdiJ]

What is the name of your state (only U.S. law)? Virginia

Hello, due to a medical crisis I owe municipal taxes (real property, some state and no federal) and a lien and property seizure has been placed on my primary residence (the lien is less than 5% of the market value of my property). While I am cash poor and land rich, my years of not having an income has removed the option of securing conventional financing. Meanwhile, the county says they will not negotiate a payment plan, and are anxious for me to have any bank accounts at all so they can garnish them. I feel that I am now recovered to the point where I can work off my debt and require advice about how best to proceed.

A) Is my understanding correct that wages from employment are subject to garnishment to a maximum of 25% if the annual salary is beneath the median income?

B) Is it correct that if self-employed--all monies in all bank accounts (personal or business) are considered "receivables" and thus 100% subject to garnishment?
B1) Are loan proceeds and grant awards also considered "receivables"?
B2) Does 100% garnishment also mean that I would not have the funds to pay self-employment tax--and thus would have also created a federal tax problem for myself in attempting to resolve a municipal one?
B3) If I have a job and a sole proprietorship, would the remaining 75% of my employment wages also be subject to garnishment?

C) I am a single, minority, woman independent artist with no children who receives no public assistance. Is it in my best interests to form a corporate entity for my business activities--to protect my means of continuing to generate income and pay new taxes as they are incurred, while paying myself a salary which would be subject to garnishment for the repayment of my debts?
C1) As an employee of my corporation, would a maximum of 25% of my wages be subject to garnishment (if the annual salary is below the median)?
C2) As good fortune and effective work allows me to do so, could I then assign myself bonus compensation to be used to further reduce my debt?

Thank you very much for your expert time and consideration!

You really should get a consult with a local tax attorney. Your situation is too complex to rely on advice from an internet message forum.

However, I will give you some anyway. It may be that an LLC, electing to be taxed as an S-corp, may be a better way to go for you. However an S-corp would also help you, but liens can be placed against your shares in the S-corp. With an LLC you would not own shares, and would be member instead, therefore it would be more difficult for any liens to be placed against the business itself.

I am also uncertain as to how much of your wages could be garnished for that purpose, as I do not practice in VA.

Take this information and go talk to a local tax attorney. Do so quickly because you are already at the point of seizures and liens, and you don't want them auctioning off your home when you owe less than 5% of its value in taxes.

 

[scyllacharybdis]

Wage vs Receivables garnishment in Virginia

Dear Ldij, thank you for writing! I have talked to some local attorneys and I am now consulting this message forum as a means of learning more about the issues related to my concerns and to find qualified Virginia practitioners to help me make a more informed decision about the services I seek and the methodology for meeting my objectives.

Having seen references to these issues on this forum, I would still greatly appreciate answers, comments and advice on how garnishments work in Virginia with regard to employee wages versus "self-employment receivables."

 

[pattytx]

Government can get garnishments for taxes due ordered against anybody paying anything to the debtor, including wages by an employer. The past due taxes do not need to be related to the wages paid by the employer. Happens all the time.