Salary and 1099 Garnishment

For a multitude of reasons, wages are garnished. Because creditors collect settlement direct from paychecks, this is a serious situation for people in debt.

First, wage garnishment occurs after a verdict has been arrived at against the defendant. The defendant's paycheck is garnished as a result. This means that money is automatically collected from the paycheck (or other source of income) to be paid to the creditor or plaintiff. Here are some typical reasons that wages are garnished:

* Unpaid child support. * Unpaid taxes. * Owed court fines. * Unpaid student loans. * Credit card debt. * Other monetary responsibilities.

Varying in each state, federal law maintains garnishment at twenty-five percent. Few states allow garnishments of lower amounts, while states like Texas, South and North Carolina, and Pennsylvania don't allow garnishment. The specific heirarchy for garnishments to be collected when income is not enough is federal first, state second, and credit cards last.

When garnishing wage, the IRS has a process that has to be complied with:

* The first thing sent is a Notice and Demand for Payment. * 30 days before garnishment is effective, a Final Notice is sent. (Note: Plenty of people don't get the Final Notice because it doesn't have to be delivered in person. They may not know their wage are going to be garnished.) * Unless other deals are made for payment or dues are paid off, salary will be garnished. Defendants cannot decline to have their wage garnished.

Companies that hire private contractors or freelancers have to file a 1099 form to the IRS to declare income. Taxes are computed by the 1099 contractors themselves.

An employer has no choice but to take settlement out of an employee's paycheck when wages are garnished. Employers are not obligated to do so, though, with private contractors or freelancers. Instead of the wage being garnished, the contractor's bank account or accounts receivable are levied by the credit.

The IRS and other creditors can freeze and seize money when a bank account is levied. Until the debt is resolved, this can be done.

Wage garnishment or bank levies are tough matters. Before debt is beyond control, get IRS help from an experienced tax lawyer such as Darrin T. Mish.