If you fail to pay your taxes in Indiana, the Indiana Department of Revenue can garnish your wages. Before seizing your wages, the collector for the department may notify you of its intent to garnish and give you a certain amount of time to pay. If you still don’t pay, the collector may proceed with the garnishment.
Initial Stages of Collection
During the first stage of the collections process, the Indiana Department of Revenue performs an assessment of your account, including the type of tax, due date and tax period. The department then sends you a bill, which you should verify. The bill includes the tax owed plus interest and penalties. If you disagree with the bill, you have 60 days from the bill date to contest it. If you cannot pay your bill, it’s best to promptly contact the agency to make payment arrangements. If you don’t contact the agency, it will send you a Demand Notice for Payment, which you have 10 days to respond to.
Tax Warrant Procedures
If you do not pay your debt or make payment arrangements after receiving the Demand Notice for Payment, the department may file a warrant in all the county clerk’s offices that you have assets in. The warrant goes to either a collections agency or the sheriff, who is responsible for collecting your balance, which also includes court costs and agency fees. The collector can choose to garnish your wages, levy your bank account or auction your property. Though a tax warrant is not an order for your arrest, it becomes a lien on your property and shows up on your credit report.
Garnishment Withholding Limits
For a wage garnishment for state taxes in Indiana, your employer can withhold up to the lesser of 25 percent of your disposable earnings or the total by which your disposable income exceeds 30 times the federal minimum hourly wage. Your employer can deduct a one-time processing fee for that garnishment of $12 or 3 percent of the garnishment amount, whichever is more. Half of that fee comes directly out of your wages, and the other half is paid by the party that initiated the garnishment. This fee amount does not apply to child support garnishments.
Federal Wage Garnishment
The Internal Revenue Service can seize your property or garnish your wages for delinquent federal taxes. Similar to the Indiana Department of Revenue, the IRS gives you time to pay the debt or make payment arrangements before resorting to wage garnishment. For example, the IRS will send you a levy notice prior to garnishing, and you will have 30 days to respond. When figuring your levy amount, your employer must refer to IRS Publication 1494, which states the amount of wages you’re allowed to keep.
Depending on the amount of your tax bill, you can make payment arrangements to pay your state taxes through the Indiana Department of Revenue’s website. The length of your payment plan depends on your tax balance. The department encourages taxpayers to pay their bills in full, because an installment agreement does not remove penalties and interest, which keeps accruing until the debt is satisfied.
- State of Indiana: Chapter 23. Provisions for Collection of Delinquent Personal Property Taxes
- State of Indiana: Stages of Collection
- State of Indiana: Information Maintained by the Office of Code Revision Indiana Legislative Services Agency
- IRS.gov: Levy
- IRS.gov: Publication 1494
- Indiana Department of Revenue: Individual Income Tax - Payment Arrangements
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.