Federal Wage Garnishment Law

There are many ways to avoid wage garnishments from happening, but once a consumer is faced with a wage garnishment, it is very important that they become well versed in the federal wage garnishment laws that are designed to protect them. People can enter into wage withholding situations voluntarily with the IRS, and not all wage garnishments are the result of a court injunction. These laws have amendments and clauses therein to protect the average consumer from being left completely destitute and financial destruction. The Consumer Credit Protection Act, Title III, expressly limits the amount of income that is subject to federal withholding and prohibits an employer from taking adverse action against an employee for having a wage garnishment.

Understanding laws surrounding wage garnishment

The only income that is subjected to garnishment is the after-tax income. The IRS does not garnish the income based upon the gross earnings. Taxable income would include, state, local, and federal taxes, as well as any deductions made for health insurance, union dues, 401K or retirement deductions, previous wage garnishments, child support, social security, savings bonds or charity deductions. Also, all types of income being withheld for the purpose of an employee loans are also exempt according to federal wage garnishment laws.

How much money can they take from me?

Federal wage garnishment laws require that only a certain amount of income may be withheld in a certain pay period. The figures set up are as follows:

* 25% of the employees after tax income or the amount by which the after tax income is thirty times more than the federal minimum wage
* Minimum wage standards vary state by state and the weekly garnishment amount cannot go over these two figures.

This figure is based upon a person who receives a weekly pay check, however, if you are paid bi-weekly or monthly, then the wage garnishment will be recalculated and the amounts reflected based upon that information.

Can I contest the garnishment or do I have to accept it?

As with any federal wage garnishment laws, there are exceptions as to what income is taxable or not and you have rights to contest withholding of certain types of income. This income is as follows but not limited to the following: child support, veterans pay, government pension payments, unemployment benefits, public aid, funds in a community or joint account shared with others including a spouse, and various other types of income provided to you by the state. In order to protect this income from garnishment actions you will need to consult with a tax professional and have them file a document with the courts within 28 days of receiving your garnishment notice.

What else can the IRS do besides take payroll wages?

It is important to note that if you owe money to the IRS, you need to do the best you can to settle it; otherwise the IRS may garnish your wages or levy your bank account. Federal laws not only protect you as a consumer, but also protect the IRS and state agencies. You may be able to avoid legal action being taken by contacting the IRS and working with them to come to some type of agreement, thus avoiding wage garnishments or bank levies altogether. It should be noted that the IRS has a limited amount of time to collect an outstanding tax debt. Certain taxpayer actions may extent the statute of limitations and allow the IRS more time to collect. You must be aware the IRS will continue to seek withholdings until the debt is paid in full. There are no laws around that are going to protect you if you run and try to hide from the IRS, so it's best to face it head on and be prepared.

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Federal Wage Garnishment Law

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