If Your Wages Are Garnished Will Your Income Tax Be Garnished as Well?
An administrative wage garnishment is when the federal government, at the request of a creditor, mandates your employer to withhold a certain amount of your disposable income before wages are paid. The difference is then used to repay the debt you owe. Although income tax refunds may also be withheld, it is not garnished in the same way as your wages.
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Wage Garnishments
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A wage garnishment is when the federal government demands that at least 15 percent of an employee's disposable income is withheld by his employer. A wage garnishment is just one of the methods used by the government to collect unpaid debts. Other methods include the use of private collection agencies, demand letters and telephone calls, federal payment offsets as well as credit reporting agency monitoring. In theory, any debt may lead to wage garnishment, but the most common reasons include the failure to pay taxes, court fines, student loans and child support.
Wage Garnishment Process
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Before wage garnishment begins, the creditor first obtains a court judgment that legally enforces the garnishment of wages. Then, the creditor will send the debtor a letter detailing the nature of the debt and its intention to garnish wages. This notice is sent at least 30 days prior to wage garnishment. At this point, the debtor still has the opportunity to settle any outstanding accounts or even object to any claims. Otherwise, the creditor will send the employer an order for withholding wages, which stipulates that the employer must withhold 15 percent of the employee's disposable income before wage disbursement. Thus, wages are garnished before the employee receives his paycheck.
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Income Tax Refunds
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As income tax refunds are not considered wages, they are not garnished in the same way. This is because the wage garnishment process occurs before wage payment, and not after. However, the federal government may still decide to withhold any federal income tax refunds before they are paid to you. This is known as a tax offset. Alternatively, if you get your income tax refunds paid directly into your bank account, they may still be garnished by the federal government. However, if the tax offset creates severe hardship -- for example, the inability to pay medical expenses -- you may still request that any federal tax refunds are returned to you.
Reclaiming Income Tax Refunds
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If you are experiencing hardship and are currently or about to enter a tax offset, you may send a letter to the creditor to request a reversal of the tax offset. In addition to medical expenses, situations that warrant tax refunds include the failure to pay rental expenses, possibility of eviction or unemployment. In addition to the letter, you should also send the creditor or institution documents that prove your case of hardship, which may include your rent or mortgage bills, income statements, medical bills and income tax forms.
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