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  1. #1
    Join Date
    Apr 2010
    Posts
    3

    Default 1099 and Wage Garnishment

    Hi folks,

    After some extensive research, and not really finding what I'm looking for, I've turned to you guys.

    My situation: My employer received a wage garnishment notification for me for last federal student loans. I have already spoken with the company, and while I can rehab my loan (which I am doing), I cannot stop the wage garnishment, which will take place for the remainder of the 9-month rehab program.

    My question is this: I am a 1099 worker. I *technically* work on a salary+commission basis, and get paid the same amount every week (unless I get a commission that's more than my salary amount, but that has yet to happen). Is it true that because of my 1099 status, the collection agency can freeze any and all bank accounts?

    I have the option at work to be a W-2 if I want to, but in the past it has benefited me more to be a 1099. If they truly can freeze my assets, should I switch over now to a w-2 and to the wage garnishment just like any average employee?

    Thanks in advance!

  2. #2
    Join Date
    Dec 2009
    Location
    not here
    Posts
    1,449

    Default Re: 1099 and Wage Garnishment

    Whether you are a 1099 contractor or a W-2 employee is determined by what you do, not by which you prefer. From what you've posted, it sounds very much like you've been misclassified as a 1099 worker. You and your employer may be in for more doo-doo than a simple garnish order.

  3. #3
    Join Date
    Dec 2007
    Posts
    2,360

    Default Re: 1099 and Wage Garnishment

    As an independent contractor, you legally don't have an "employer", you have a "client". Does the order specifically say "wages" or does it specify, "any and all payments due"?

    Legally, it is not your "option" as to whether you are an independent consultant or an employee. If you have been misclassified as an IC, your company (and you) have a number of other issues. If the employer is giving you the "option", it sounds like you may be misclassified.
    http://www.irs.gov/pub/irs-pdf/p1779.pdf

    Yes, it is true. Your assets can be frozen and your bank accounts levied. This would be true whether you are an employee or an IC. It's just that if you are an employee, the collection agency (government funded student loan arrears are outsourced to a collection company) will try a wage garnishment order first, because it is MUCH easier for them than to jump through the hoops of attaching your bank accounts.

    Honestly, it is to your advantage to be an employee. Taxes are withheld instead of you having to make estimated tax payments. You don't have to pay the matching portion of FICA and Medicare taxes. You are covered for unemployment and Worker's Comp. You are entitled to all protections under wage and hour laws, and anti-discrimination laws. None of those things are present for ICs.

    If you can "switch" over to employee status now, I would recommend you do it pronto.

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