Written by Gillian Katsumi
February 6, 2020
What is wage garnishment?
A wage garnishment is an order from a court or government agency that requires your employer to withhold a specific portion of your paycheck and send it directly to the creditor or person to whom you owe money. Your earnings will be garnished until your debt is paid off or otherwise resolved.
Garnishment usually occurs when a creditor sues you for the failure to pay a debt and wins in court. However, a creditor can also force garnishment without a court order in specific cases, such as if you owe taxes, child support or federal student loans.
Wage garnishment in North Carolina
North Carolina is one of the few states to limit the types of debts that can be collected by wage garnishment, meaning that there are only specific debts which can result in funds being taken directly from your paycheck. According to North Carolina law, your employer may be ordered by a court to garnish, withhold or deduct wages from your paycheck to pay a creditor for the following types of debts:
Unpaid income taxes
Court-ordered child support
Defaulted student loans
Unemployment benefit overpayments
Ambulance services (in certain N.C. counties)
Garnishment orders issued by other state
The courts of North Carolina are not permitted to order an employer to withhold wages for other types of debts such as car loans, credit card debt and other personal debts. However, creditors may still be able to place a lien on your personal property, such as your home or automobile.
How much of my wages can be garnished?
The good news is that there are limits on how much of your wages a creditor can take. Garnishments by the North Carolina Department of Revenue cannot exceed 10% of your gross wages. There are also federal laws regarding garnishment percentages that depend on the debt type. These percentages are taken from your disposable earnings (not gross wages), which is any income left after your employer has made the necessary deductions, such as taxes and Social Security.
Here are the federal garnishment percentages:
Out-of-state garnishments – A creditor can garnish 25% of your disposable income OR the amount by which your disposable income exceeds 30x federal minimum wage, whichever is less
Child support – A creditor can garnish up to 50% of your disposable income if you are currently supporting a spouse or a child who isn’t subject of the order; if not, up to 60% of your disposable income can be garnished. (*An additional 5% is allowed for support payments over 12 weeks in arrears)
Defaulted student loans – The U.S. Department of Education (or entities collecting for the agency) can deduct up to 15% of your disposable income without a court judgment.
Unpaid taxes – The federal government can deduct wages without a court judgment, and the amount depends on your dependents and deduction rate.
I have received a “Notice and Demand for Payment” from the IRS. What can I do?
Before the IRS can garnish your wages, it must first send you a “Notice and Demand for Payment.” If this demand is not met, the IRS must send you a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing” which allows you to either pay or find another tax solution within 30 days from the date of the Final Notice. If a payment is not made within this time and no resolution is offered, the IRS will give no further notice and will file a wage garnishment with your employer. The garnishment will not go away unless your tax debt is paid in full, a financial hardship is found, a payment plan or offer in compromise is being considered by the IRS, or you declare bankruptcy.
To avoid garnishment of your wages by the IRS, a tax resolution specialist can assess your financial situation and devise a plan to find the best tax resolution for you. You can settle your IRS tax debt through either the IRS Offer in Compromise Program or by negotiating an affordable payment plan to avoid a tax levy on your wages.
My wages are already being garnished by the IRS. What can I do?
Once the IRS begins garnishing your wages, it is not often inclined to release it until your debt is entirely paid off. While requesting a release of an IRS wage garnishment is a difficult process, it is not impossible to have your garnishment released before your debt is paid in full. Your best option for asking for a garnishment release could be to hire an experienced tax attorney. A tax attorney can present evidence for why your garnishment should be released now rather than after the debt is satisfied.
How can a company like Carolina Tax Resolutions help me?
Carolina Tax Resolutions can get most wage garnishments lifted within 3 to 5 business days. Simply sending a letter in the mail is unlikely to resolve your garnishment issue. At Carolina Tax Resolutions, our attorneys will speak directly to the entity that garnished your wages and skillfully negotiate on your behalf. Our tax resolution team fully understands how the IRS works and what solutions are available for your specific issue. Call us at 919-916-1000 to schedule your free tax consultation.