Garnishment of 1099s and Wages

Because creditors take payments direct from paychecks, salary garnishment is a tough situation for people in debt. For a number of reasons, people can have their salary garnished.

When a judgment has been made the defendant, salary garnishment occurs. As a result, the defendant's paycheck is garnished. This means that to pay the plaintiff or creditor, money is directly collected from the paycheck or other income sources. 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.
* Unpaid student loans.
* Other monetary responsibilities.

Differing from state to state, federal law maintains garnishment at twenty-five percent. Few states provide garnishments of lower amounts, while states like Texas, South and North Carolina, and Pennsylvania don't allow garnishment. If income is insufficient, there's a fixed heirarchy for garnishments to be taken: federal, then state, and lastly, credit cards.

When garnishing salary, the IRS has a procedure that has to be followed:

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* Serve a Notice or Demand for Payment.
* Serve a Final Notice no more than 30 days prior to garnishment. These don't need to be served personally, so a lot of people don't get it and aren't aware that their salary is about to be garnished.
* Unless other settlement arrangements are decided, wages are garnished until debt is paid fully. Garnishment can't be declined.

1099 is the form that is given to freelancers, like writers, actors, and artists who are not employees of particular companies. If a company pays a freelancer $600 or more in a year, they must file a 1099 form. These go to the IRS and report income. 1099 freelancers compute taxes themselves.

If an employee has his wage garnished, the employer has the responsibility to take the settlement out of the paycheck. If the employee resigns and becomes a independent contractor or a 1099 freelancer, then the employer is obviously released from that obligation. Instead of garnishing salary from an employer, the credit can levy the contractor's accounts receivable. This means that the bank account can be levied when an independent contractor gets a check from a company.

The IRS and other creditors can freeze and seize money when a bank account is levied. Until the dues are settled, this can be done.

Having your bank account levied or your salary garnished is serious. To assist you with IRS issues, talk to seasoned lawyers such as Darrin T. Mish.