Attachment and Garnishment - Employer Copy

As a business person, you likely want to work hard, keep your head down, and avoid any issues with the IRS. And this is commendable. However, you might find yourself dealing with the IRS thanks to one or more of your employees. 

Each employee and indeed income-earning citizen is expected to file returns and pay their taxes on time. Failure to do this leads to the accumulation of back taxes, among other fines and penalties. When an individual accumulates back taxes, the IRS sends them a series of letters and notices urging them to comply. If they don’t, the tax collection agency can move to garnish the employee’s wages.

What Is Wage Garnishment?

You might have an employee working for you with a tax liability. In such instances, the IRS writes to you as an employer requiring you to withhold a certain amount from an employee’s paycheck. This is known as attachment and garnishment, and the withheld amounts are to be submitted to the IRS until:

• The outstanding amount is fully settled when the IRS sends you a garnishment release letter
• The employee negotiates and enters into a voluntary payment plan with the IRS
• The employee challenges the garnishment in court and wins
• The employee can show that the garnishment is causing them financial hardship

Once you get an attachment and garnishment notice, you must comply with the stipulated instructions in the letter. A garnishment order is a legal requirement, and as uncomfortable as it might be for yourself and your employee, your strict compliance is required.

What Do I Do About an Attachment and Garnishment Notice?

An attachment and garnishment letter will give you the name of the employee and the deductions you need to make. You need to make these garnishment payments every 30 days until the liability is paid off. 

These payments can be made online, and you are encouraged to do so through eServices. This ensures timely and accurate payment posting. 

For employers that don’t wish to make online payments, the garnishee must fill in coupons and indicate the taxpayer’s account with each payment. These garnishee payment coupons are mailed to the employer alongside the wage garnishment notice and also come with instructions.  You mail these alongside the payment to the provided IRS address. 

Can I Deduct and Pay the Full Amount?

Typically no. There are rules as to how much the IRS can ask you to withhold and submit. 

However, an employee, by their own volition can decide to make larger payments from their paycheck or other monies to pay down the liability faster. They can also choose to make one lump sum payment and clear their liability. On your end, you only need to make the deductions as stipulated in the attachment and garnishment letter. 

In North Carolina, the amount is typically 10% of the employee’s gross wages. However, other payments, for example, contractual payments, are not restricted to the 10% rule. 

The information below should help simplify this. 

If you report a taxpayer’s wages on W-2, then deduct 10% of the employee’s paycheck and submit it to the IRS until the liability is settled. 

However, if you report contractual payment on a 1099, then withhold 100% of the earnings and submit to the IRS, or the portion of it required to settle the liability in full. 

If as an employer you also collect other funds like bank accounts, rent, and royalties, then withhold 100% of these earnings until the liability is fully satisfied. 

What If An Employee Has Multiple Garnishments?

Garnishments from the IRS can run concurrently with other types of garnishments. This means IRS garnishments need to be alongside the others, for example, child support, but still within the 10% limitation. 

Once a tax liability is cleared, the IRS will send you a garnishment release letter. This is to let you know that you no longer need to make the payments from the taxpayer’s wages. However, if the taxpayer has other active garnishments, then you cease the completed ones and keep making payments for the remaining ones. 

What If You Get A Garnishment Letter For An Employee That Left Your Company?

The IRS sends wage garnishment letters to a taxpayer’s last known place of work. You might get one for an employee who just quit working for you. 

In this event, you need to respond to the IRS with a filled-in Separation of Employment Notification Coupon.

Need Help?

Indeed entanglements with the IRS can get murky, even with no wrongdoing on your part. All you need sometimes is to speak to a knowledgeable tax attorney to help you decipher notices and chart a clear way forward.

If you or your business has any tax or IRS-related issues, one of the best things you can do is to speak to an expert. Book a free consultation with the Cumberland Law Group today and let us help you get things back on track.