If you are facing or already having your wages garnished, your life can have serious consequences. Having an average of 25% taken from your wages can be financially crippling.
When a creditor has a judgment against you (meaning the creditor has sued you for the nonpayment of a debt you owe, and the court ruled in favor of the creditor), that creditor can garnish your wages. Garnishment is a legal order to take a certain amount of money from your wages to pay back a debt.
The IRS can also be a creditor. If you owe any back taxes, fees or penalties, the IRS does not have to go to court – the IRS can garnish your wages without any type of judgment.
The IRS is the only creditor capable of imposing fines or sending you to prison for failure to pay a debt. The IRS doesn’t have the time or money to launch criminal investigations into everyone they think has committed fraud. However, just the fact they could take away your freedom for unpaid tax debts is horrifying and intimidating.
The IRS can levy any or all your property. A levy is a legal seizure of your property to satisfy a tax debt. A levy is different from a lien. A lien is a claim used as security for the debt, while a levy actually seizes the property to satisfy the debt. When the IRS seizes your property (such as your bank account, house or car) they will sell that property and keep the money to pay your debt.
The IRS can and will also garnish your wages to pay your tax debt. The IRS will send your employer a Form 668W – “Notice of Levy on Wages, Salary and Other Income”. Your employer has to comply by deducting the amount the IRS has declared before paying you your wages.
Each state is free to impose the amount a creditor can garnish from your wages. Colorado has not imposed any law regarding an amount, therefore, Colorado is governed by the federal law. The federal law permits creditors to garnish the lesser of either; 1) 25% of your disposable earnings, or 2) the amount of your disposable earnings that exceed 30 times current federal minimum wage (a formula). Disposable earnings are wages left after your employer has made deductions required by law such as income taxes, child support and FICA.
Child support can be up to 60% of your disposable earnings. An additional 5% can be garnished if you are 12 weeks in arrears.
Federal student loans that are in default can take 15% of your disposable income garnished by the U.S. Department of Education (or any entity collecting for the agency), but not more than 30 times the minimum wage.
Colorado state, and local government can garnish your wages if you owe back taxes. The IRS is always first in line to garnish.
If you are threatened with wage garnishment, call our Denver tax attorney, Tyler Murray, LL.M. (Masters degree in taxation) regarding your situation and defending your rights. There may be options we can take to help you.
Tyler Murray, LL.M, of the Gantenbein Law Firm, is a licensed Denver, Colorado Tax attorney, servicing all of Colorado. Along with being a licensed lawyer, Tyler Murray has a Masters in Law in Tax. If you are facing a tax audit, tax appeal, or other tax issue, or need professional assistance with your Colorado tax planning, contact experienced Denver tax attorney Tyler Murray at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.
Gantenbein Law Firm practice also includes Real Estate Law, Tax Law, Foreclosure Defense, Business Formation & Representation, Business Law and Family Law. This combination is exceptional in that it provides our clients a complete and full perspective of the most common issues surrounding your unique assets.
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