Help! The DFA Is Garnishing My Wages: What Should I Do?

The state government has a lot of power to collect unpaid taxes. If you don't pay your taxes in Arkansas, the Department of Finance and Administration (DFA) can come after your assets, and most commonly, that takes the form of a wage garnishment. 

A garnishment can be financially devastating, regardless of your income level. But there are options. Use TaxCure to find a tax resolution professional who's experienced with this state's tax codes and collection procedures. Or keep reading for an overview of what to expect when the DFA garnishes your wages. 

Key takeaways

• The AR DFA can garnish wages and bank accounts for unpaid state taxes. 
• The Final Assessment Notice gives you 70 days to pay or appeal.
• During 70 days, you can avoid the garnishment by setting up payments.
• After the 70 days, the DFA will start the garnishment.
• To stop a garnishment, you may need to prove error or financial hardship. 
• Use TaxCure to find an Arkansas-based tax pro to help you.

How Garnishment Works in Arkansas

Like most other state revenue agencies, the DFA can garnish your assets without court approval — they just need to send you the right notices. In contrast, most private creditors must take you to court and get a judgment against you before pursuing this option. 

You may face wage garnishment if you have unpaid state taxes, including individual income tax, property tax, or business taxes such as sales, withholding, corporate income, or state excise taxes. 

When it comes to state taxes that were withheld from your employees' pay or sales tax, the DFA may be able to pierce the corporate veil and go after you individually, as these are trust fund taxes. That simply means that you collected the taxes from another person (sales tax from your customer and withholding tax from your employee) and you never remitted them to the state. 

How long does it take the AR DOR to garnish wages?

Generally, it happens a few months after you file. If you don't pay the tax owed on your return, the DOR will send you a Notice of Proposed Assessment, that gets sent 10 days after the assessment is finalized. 

If you don't pay or contact the DFA to make arrangements, they'll send a Final Assessment and Demand for Payment. At that point, you have 70 days to appeal before they garnish your wages or financial accounts. The DOR may also move forward with seizing other assets — however, wage garnishment is the most popular option as it's the easiest to carry out.

Can my employer deny the garnishment request?

No, by law, your employer must comply with the wage garnishment. If not, they risk becoming personally liable for your tax debt. Generally, after your employer receives the garnishment notice, they must start to withhold money from your paycheck and send it to the state within one or two pay periods. 

The same is true of banks. If the state or the IRS decides to levy your bank account, your bank must comply with their demands.

Your Rights Before and During Garnishment

As a taxpayer, you have rights, but unfortunately, the collection process can still feel pretty brutal in spite of that fact. Here's what you need to know to protect yourself:

1. You have the right to appeal tax assessments. For instance, if the DFA adjusts your return, assesses tax in an audit, or assesses tax against you in a period where you didn't file a return, you have the right to appeal.
2. You can appeal procedural errors. Did the DFA make a mistake when garnishing your wages or seizing assets? If so, appeal based on procedural grounds. 
3. You must be notified about collection actions. The DFA must notify you in advance before seizing your assets. With a wage garnishment, they must send you a Final Notice that gives you 70 days to respond or appeal. 
4. You have the right to representation. Dealing with the DFA can be confusing and stressful, but you don't have to do it alone. When you use TaxCure to search for help, you can narrow down the search to find pros who have dedicated experience dealing with wage garnishments in Arkansas - just use the filters to customize your search results. 
5. You have the right to request relief. If the wage garnishment is causing immediate financial hardship, the DFA may remove it, but it's important to note that the state has a fairly stringent view of what constitutes financial hardship. 

Why didn't the DFA notify me about the garnishment?

If you didn't get ample warning of the garnishment, either:

1. The DFA made a mistake, and you should appeal immediately, or 
2. The DFA is using jeopardy collection procedures against you.

Usually, the DFA must send a warning of garnishments as explained above, but sometimes, the state doesn't have to give you the full 70-day warning. The DFA can do a jeopardy levy with little to no warning if they suspect that:

• You plan to move from the state, to remove your property from the state, or to hide your property.
• You plan to close your business without taking care of state taxes.
• You intend to take any act designed to prevent the state from computing, assessing, or collecting state tax. 

In these cases, the state can make an immediate assessment (regardless of usual time limits to do so). They must notify you of the assessment within five days. At that point, you have five days to protest, or the DFA can take your assets.

Even the protest process is expedited in these cases — if you protest, appeals will hold a hearing within five days. After they issue their opinion, you have three days to pay the tax or request judicial relief. So, in other words, the jeopardy collection process can play out very quickly, and the state may garnish you within weeks of notifying you of the tax assessment.

How to Stop a Garnishment

Once a tax garnishment has started in Arkansas, it's very hard to stop. Of course, if you pay in full, the DFA will immediately stop the garnishment. Otherwise, you can generally only stop it by proving that it was done in error - for example:

• The DFA didn't notify you properly.
• The garnishment is on assets that aren't owned by the taxpayer - for instance, the DFA garnished your wages for a tax debt your spouse incurred before you were married, or they made a mistake related to your tax ID number. 
• The garnishment is causing immediate financial hardship - in other words, it makes it impossible for you to pay for essential living expenses. 

However, a tax pro may be able to convince the DFA to stop the garnishment if you set up a payment plan on your bank taxes or apply for an Arkansas offer in compromise. 

Whenever possible, you want to avoid a wage garnishment, which you can do by proactively setting up a payment arrangement. If you receive a Final Notice of Assessment, take action within the 70 days if you want to protect your income and other assets. 

Will moving out of state stop the garnishment?

No, under Arkansas statute, if you move out of state, the county collector will find out where you moved, and they have the right to notify the government officials in your new county about your tax debt and the garnishment. Then, anything titled in your name in your new area will be at risk.

Can You Get Garnished Money Back?

Generally, no. When the government takes money from your wages or bank account for an unpaid tax debt, you typically cannot get that money back. The main exception is if it was taken in error or if the DFA made a procedural error (for example, not sending you the right notices).

However, if the state seizes your physical assets, there is generally a way that you can get them back during a limited window of time called the redemption period — this typically requires you to pay interest and possibly collection costs. 

How to Prevent Future Garnishments

To protect yourself in the future, file and pay your taxes on time. Use these tips to help you avoid an unexpected tax liability:

• Adjust your withholding if you're employed — This helps if you had a tax bill because your employer didn't take out enough income tax. If you have a freelance side gig, you can also have your employer take out extra taxes to cover the tax liability on your 1099 income. 
• Automatically set aside freelance income for taxes — If you work for yourself, find some way to automatically put 25 to 30% of your income in a savings account for taxes. You may need to adjust that up or down depending on your specific tax situation. 
• Respond to all DFA notices — If the DFA adjusts your return, you may face an unexpected tax liability. If you don't appeal or pay within a certain time frame, you risk facing a tax garnishment. To protect yourself, read all DFA notices. 
• Update your address with the DFA — The DFA sends most notices to your last address, and if you move after filing, you may miss notices. Create an online account to update your address with the state, and if you move, use the USPS forwarding procedures to ensure your mail gets forwarded to your new address. 
• Be proactive about tax debt — If you owe the state, make arrangements right away. Even if you can't afford to pay, you may be able to secure a settlement or have the DFA agree to pause collections against you. Unfortunately, ignoring the situation will make it worse and put your income and assets at risk. 

You Still Have Options - Find Help Today

DFA garnishments are very serious, but you have options — with the right legal help, you can negotiate with the DFA and get back into good standing with state taxes. To get help now, use TaxCure to find an Arkansas-based tax professional today.