The IRS's 1099 Bank Garnishment of Salary

Wages are garnished for a score of reasons. Because creditors take settlement direct from paychecks, this is a serious situation for people in debt.

When a judgment has been made the defendant, wage garnishment happens. As a result, the defendant's paycheck is garnished. This means that money is directly collected from the paycheck (or other source of income) to be paid to the creditor or plaintiff. Wages are garnished by these typical reasons:

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* Debt to credit card companies.
* Child support is owed.
* Unpaid court fines.
* Unpaid taxes.
* Student loans in default.
* Other monetary dues.

Varying in each state, federal law maintains garnishment at 25%. States such as Pennsylvania, North and South Carolina, and Texas don't allow garnishment, while others allow lower amounts for garnishment. If income is not enough, there's a fixed heirarchy for garnishments to be collected: federal, then state, and lastly, credit cards.

When garnishing wage, the IRS has a procedure that must be followed:

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* Serve a Notice or Demand for Payment.
* Serve a Final Notice no more than 30 days before garnishment. These do not need to be delivered in person, so plenty of people don't get it and don't know that their salary is going to be garnished.
* Unless other payment deals are made, salary is garnished until dues are paid in full. You can't decline garnishment.

1099 is the form that's given to private contractors, like writers, actors, and artists who aren't employees of specific companies. If a company pays a private contractor $600 or more in a year, they have to file a 1099 form. These declare income to the IRS. 1099 freelancers compute taxes themselves.

If an employee has his wage garnished, the employer has no choice but to take the payment out of the paycheck. The employer is released from that responsibility if the employee becomes a 1099 private contractor or freelancer. The contractor's accounts receivable can be levied by the credit, instead of garnishing salary. This means that when an independent contractor receives payment from a company for work, the bank account can be levied.

When a bank account is levied, it's frozen, and all or some of the money in the account is seized. The IRS does it, as well as other creditors. Creditors can levy bank accounts until the debt is paid.

Bank levies or garnishment of wages are serious situations. Seek IRS assistance from an experienced tax lawyer such as Darrin T. Mish before debt is out of control.