The IRS's 1099 Bank Garnishment of Salary

Because creditors take payments direct from paychecks, wage garnishment is a serious situation for people in debt. People can get their wage garnished for a score of reasons.

When a verdict has been arrived at the defendant, salary garnishment happens. The defendant's paycheck is garnished as a result. This means that to pay the plaintiff or creditor, money is directly taken from the paycheck or other income sources. Here are some common reasons that wages are garnished:

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* Credit card debt.
* Child support is required.
* Court fines unpaid.
* Taxes are unpaid.
* Defaulted student loans.
* Other monetary dues.

Garnishment is maintained by federal law at twenty-five percent and varies from state to state. Some states allow garnishments of lower amounts, while states such as Texas, South and North Carolina, and Pennsylvania do not allow garnishment. The specific heirarchy for garnishments to be taken when income is insufficient is federal first, state second, and credit cards last.

The IRS procedure that has to be followed when garnishing salary are:

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* A Notice or Demand for Payment should be served.
* At least thirty days before garnishment, a Final Notice is served. Plenty of people don't know their salary will be garnished because these do not need to be delivered in person and usually not received.
* Unless other payment deals are decided, salary is garnished until debt is paid in full. Garnishment can't be declined.

To declare income to the IRS, companies that hire freelancers or independent contractors have to file a 1099 form. Taxes are computed by the 1099 contractors themselves.

When wages are garnished, the settlement has to be collected out of an employee's paycheck by the employer. With freelancers or private contractors, employers aren't responsible to do so. The contractor's accounts receivable or bank account are levied by the credit, rather than the salary being garnished.

When a bank account is levied, the IRS and other creditors can freeze and seize money from it. This can be practiced unless the debt is resolved.

Salary garnishment or bank levies are tough matters. Before debt gets beyond control, seek IRS help from a seasoned tax lawyer like Darrin T. Mish.