Attachments and Garnishments for Employers

NC Gen. Stat. §105-242(b) states:

Intangible property that belongs to a taxpayer, is owed to a taxpayer, or has been transferred by a taxpayer under circumstances that would permit it to be levied upon if it were tangible property, is subject to attachment and garnishment as payment of a tax that is due from the taxpayer and is collectible under NC Gen. Stat. §105-241.22. Intangible personal property includes bank deposits, rent, salaries, wages, property held in the Escheat Fund, and any other property incapable of manual levy or delivery. NC Gen. Stat. §105-242.1 sets out the procedure for attachment and garnishment of intangible property.

A person who is in possession of intangible property that is subject to attachment and garnishment is the garnishee and is liable for the amount the taxpayer owes. The liability applies only to the amount of the taxpayer's property in the garnishee's possession, reduced by any amount the taxpayer owes the garnishee.

The Secretary may submit to a financial institution, as defined in NC Gen. Stat. §53B-2, information that identifies a taxpayer who owes a tax debt that is collectible under NC Gen. Stat. §105-241.22 and the amount of the debt. The Secretary may submit the information on a quarterly basis or, with the agreement of the financial institution, on a more frequent basis. A financial institution that receives the information must determine the amount, if any, of intangible property it holds that belongs to the taxpayer and must inform the Secretary of its determination. The Secretary must reimburse a financial institution for its costs in providing the information, not to exceed the amount payable to the financial institution under NC Gen. Stat. §110-139 for providing information.

No more than ten percent (10%) of a taxpayer's wages or salary is subject to an attachment and garnishment of taxes. The wages or salary of an employee of the United States, the state, or a political subdivision of the state are subject to an attachment and garnishment of taxes.

NC Gen. Stat. §105-242.1 states:

Notice:

NC Gen. Stat. §105-242 specifies when intangible property is subject to attachment and garnishment. Before the Department attaches and garnishes intangible property in payment of a tax, the Department must send the garnishee a notice of garnishment. The notice must be sent in accordance with the methods authorized in NC Gen. Stat. §105-241.20 or, with the agreement of the garnishee, by electronic means. The notice must contain all of the following information, unless the notice is an electronic notice subject to subsection (a1) of this section:

• The taxpayer's name
• The taxpayer's social security number or federal identification number.
• The amount of tax, interest, and penalties the taxpayer owes.
• An explanation of the liability of a garnishee for tax owed by a taxpayer.
• An explanation of the garnishee's responsibility concerning the notice.

Electronic Notice (a1):

Before the Department sends an electronic notice of garnishment to the garnishee, the Department and the garnishee must have an agreement that establishes the protocol for transmitting the notice and provides the information required under subdivisions (4) and (5) of subsection (a) of this section. An electronic notice must contain the information required under subdivisions (1), (2), and (3) of subsection (a) of this section.

Action:

A garnishee must comply with a notice of garnishment or file a written response to the notice within the time set in this subsection. A garnishee that is a financial institution must comply or file a response within 20 days after receiving a notice of garnishment. All other garnishees must comply or file a response within 30 days after receiving a notice of garnishment. A written response must explain why the garnishee is not subject to an attachment and garnishment for taxes. A written response must explain why the garnishee is not subject to an attachment and garnishment for taxes. 

Upon receipt of the written response, the Department must contact the garnishee and schedule a conference to discuss the response or inform the garnishee of the Department's position concerning the response. If the Department does not agree with the garnishee on the garnishee's liability, the Department may proceed to enforce the garnishee's liability for the tax by sending the garnishee a notice of proposed assessment in accordance with NC Gen. Stat. §105-241.9.

Release:

A notice of garnishment sent to a financial institution is released when the financial institution complies with the notice. A notice of garnishment sent to all other garnishees is released when the Department sends the garnishee a notice of release. A notice of release must state the name and social security number or federal identification number of the taxpayer to whom the release applies.

Financial Institution:

As used in this section, the term 'financial institution' has the same meaning as in NC Gen. Stat. §53B-2.

• 10% of an employee’s gross salary or wages must be withheld and remitted on a monthly basis until paid in full.
• All other types of property, such as contract payments, bank deposits, rents, etc., are subject to a 100% Attachment and Garnishment. Remit them upon receipt of the garnishment or when due to be paid to the taxpayer.
• The Department sends a written release of the garnishment once the liability is either paid in full or withdrawn. The garnishee is required to continue withholding funds until you receive a written release from the Department.
• Financial Institutions as defined in NC Gen. Stat. §53B-2 are released from garnishment upon complying with the notice.
• If the employee separates from your employment, you are required to notify the Department immediately. Please mail or fax the garnishment with a completed Separation of Employment Notification Coupon.
  • Mail: Garnishment and Payment Processing Unit, PO Box 27431, Raleigh, NC 27611-7431
  • Fax: 919-733-1231
  • Under the terms of the garnishment, the garnishee must withhold from any remaining wages due and owed to the employee.

• Remit garnishment payments withheld to the Department of Revenue every 30 days.
• Make payments online through eServices.
  • This ensures the accurate and timely posting of payments.
  • The Department accepts Visa or MasterCard credit/debit cards. You may make bank draft payments through the online payment application.
    • Payments by bank draft are free.
• Make payments by telephone at 1-877-252-3252 using bank draft, debit or credit card.
• If the garnishee does not wish to pay electronically, clearly identify the taxpayer's account with each payment. Include coupons that are completed fully and legibly with each payment.
  • The instructions for employers includes a set of Garnishment Payment Coupons. You may print more coupons if needed.
  • Send payments and remittance coupons to:
    Garnishment and Payment Processing Unit
    NC Department of Revenue
    PO Box 27431
    Raleigh, NC 27611-7431

NC General Statutes do not allow the Department to require deductions of more than 10% of monthly gross salaries and wages 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.

Normally, garnishment payments take no more than 30 days to clear your bank. If it has been 30 days, please contact the Department at 1-888-352-0116 for instructions.

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

You are responsible for deducting the 10%. Report the taxpayer’s last paycheck, and other funds owed upon separation of employment, on a W-2.

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

Complete a Separation of Employment Notification Coupon. Mail or fax it, or the garnishment letter or notice, with the detailed information to:

Garnishment and Payment Processing Unit
PO Box 27431
Raleigh, NC 27602-1168

Fax: 919-733-1231

Garnishments from the Department run at the same time as other types of garnishments. You must garnish alongside any others (from the IRS, child support, etc.) Other garnishments do not offset the 10% limitation.

Sometimes a taxpayer has many garnishments from the Department. Pay out the oldest garnishment first. Once you receive a release letter for the oldest, pay the next garnishment, and so on.

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

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)). So, 10% of the taxpayer's monthly gross salaries and wages must be withheld even if the 25% CCPA cap is exceeded due to other wage attachments.

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

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

The Department accepts payments directly from the taxpayer or any other third party. So, yes, an employer may decide 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. 
• Funds posted towards a taxpayer’s debt cannot be refunded as a result of default on a third-party agreement.

Once the total liability is paid in full, the Department sends the employer a garnishment release letter. In the case of multiple garnishments, a separate release letter is mailed for each. 

Employers can ask the Department for a final balance if they think they are close to paying out the garnishment.