Donate to Hurricane Recovery

Frequently Asked Questions about Garnishments

General Information

What is a bank garnishment?

A bank garnishment is a legal document that allows the taxpayer’s bank or financial institution to put a hold on their account and deduct 100% of the funds in the taxpayer's account, up to the amount shown due on the notice.

What is a vendor garnishment?

A vendor garnishment occurs when a payment to a state vendor is elctronically redirected to pay a delinquent state tax liability. State vendors are individuals or businesses that provide services to any state agency.

Before a payment is made to a state vendor, that payment is matched against outstanding tax liability. When a match is found, the funds are deducted from the payment before it is sent to the vendor.

Vendor garnishments cannot be released. If you have questions, or need more information, call 1-877-919-1819, extension 1120407.

top of page

What is a wage garnishment?

A wage garnishment is a legal document that requires the employer of a taxpayer to withhold funds from the taxpayer’s wages, salaries, or non-wage payments (contract payments, commissions, rents, royalties, etc.) and submit those funds to the Department in order to pay an unpaid tax liability. The amount that is deducted depends on the type of funds. A NC wage garnishment runs concurrently with other types of garnishments. This requirement is not offset by other wage attachments.

What are wages and salaries?

Wages and salaries are any amounts paid to an employee that would typically be reported on a W-2.

Can a garnishment attach to payments or other assets that are not reported on a W-2?

Yes. These amounts are not subject to the 10% limitation. The full amount (100%) of these types of payments may be garnished, up to the amount of unpaid tax liability shown as due on the notice.

For example, an employee of a bank may also have deposit accounts at the bank. In this case, the bank must remit 100% of any deposits to the Department. Additionally, the bank must withhold 10% of the employee’s gross salaries or wages until the unpaid tax liability is paid in full.

When will the attachment and garnishment start?

Wage garnishment deductions should begin with the next payroll cycle. Check with your payroll for verification.

Bank garnishment activity on an account typically begins before the taxpayer receives the notice. However, each bank or financial institution has different policies regarding bank garnishments. Check with your financial institution for specific times and dates.

How is a wage garnishment released?

A wage garnishment is released when the total total liability is paid. The Department mails wage garnishment release letters to the employer. However, if an additional balance accrues on a delinquent account, the Department may issue another garnishment.

If the Department issues a garnishment in error, it is released as soon as the error has been verified.

top of page

For Taxpayers

How can I prove to my employer that the taxes have been paid in full?

Call 1-877-252-3252 to request that the Department send a garnishment release letter to your employer. Your employer must continue making payments until they receive the garnishment release letter.

What if my employer fails to stop the garnishment after the balance is paid in full?

A garnishment release letter is sent to the employer once total liability is paid in full. Upon receiving the release letter, the employer should stop garnishing.

Does filing for bankruptcy stop the garnishment?

If you have a garnishment in effect and you have filed bankruptcy, call (919) 754-2542 and inform the agent that you filed bankruptcy so your account can be handled appropriately. When you call, please have the bankruptcy case number issued by the court available.

top of page

 

For Employers

Where do I send my garnishment payment?

The garnishee is encouraged to make the payments online through eServices.

  • This is the best way to ensure payments are posted timely and accurately.

If the garnishee does not wish to pay electronically, the garnishee must include information to clearly identify the taxpayer's account with each payment. Coupons must be fully completed and returned with each payment.

  • A set of Garnishment Payment Coupons is enclosed with the Instructions for Employers.
  • Payments and remittance coupons should be addressed as follows:

    Garnishment and Payment Processing Unit
    NC Department of Revenue
    PO Box 27431
    Raleigh, NC 27611-7431

Can I deduct the full amount of the attachment and garnishment from one check?

NC General Statutes do not allow the Department to require more than 10% of monthly gross salaries and wages to be deducted from paychecks. Other types of payments, such as contract payments, are not subject to the 10% limitation. You may deduct 100% of these funds, up to the amount of the total liability.

I have checks for garnishment payments that have not cleared the bank. What should I do?

Garnishment payments should normally take no more than 30 days to clear your bank. If checks have taken more than 30 days to clear, please contact the Department at 1-888-352-0116 for instructions.

What do I do if I sent a garnishment check to the Department of Revenue that should have been sent to another agency?

Contact the Department at 1-888-352-0116.

We were garnishing the wages of an employee that recently quit. What are the company’s responsibilities if the company still owes the person a last paycheck and payment for vacation leave earned but not taken?

The taxpayer’s last paycheck and other funds owed upon separation of employment are generally reported on a W-2 and are subject to the 10% limitation.

You must also notify the Department that the taxpayer is no longer employed. Send the Department a Separation of Employment Notification Coupon.

What do I do if a taxpayer has multiple garnishments in effect?

Garnishments from the Department run concurrently with other types of garnishments. This means the employer should pay a garnishment from the Department alongside garnishments from other sources (IRS, child support, etc.) The 10% limitation is not offset by other garnishments.

If the taxpayer has multiple garnishments from the Department, pay out the oldest garnishment first. Upon receiving a release letter for the older garnishment, begin withholding for the next garnishment.

What should I do if the taxpayer will receive no pay after deducting payments from multiple garnishments?

Contact the Department at 1-877-252-3252.

The payroll manual states that no more than 25% of disposable income can be garnished from an employee’s wages. Does the 25% cap apply to NC tax garnishments?

Garnishment restrictions provided by Title III of the Consumer Credit Protection Act (CCPA) do not apply to bankruptcy court orders and debts due for federal and state taxes (see 15 USC §§ 1673(b)(1)(B) & (C)). Therefore, 10% of the taxpayer's monthly gross salaries and wages must be withheld even where the 25% CCPA cap is exceeded because of other wage attachments.

Consult your attorney for advice about the CCPA cap and how the NC tax garnishment may impact other wage attachments.

Can I charge an administrative fee for handling the garnishment?

The NC General Statutes do not specifically address this (see G.S. 105-242). Consult your attorney for advice.

Can I pay the debt in full as a loan to the employee?

The Department will accept payments directly from the taxpayer or any other third party, including an employer, who decides to make additional payments on the taxpayer’s behalf. The Department is in no way a party to any loans made between the taxpayer and any other third party, including an employer. Funds that are posted towards a taxpayer’s debt cannot be refunded as a result of default on a third party agreement.

How will I know if a garnishment has been paid in full?

Once the total liability is paid in full, the Department sends the employer a garnishment release letter. If the Department has issued multiple garnishments, a separate release letter is mailed for each one. The employer may also contact the Department if they believe that they are close to paying out the garnishment and need a final balance.

top of page