Your employer cannot pay you cash to help you avoid a wage garnishment. If your employer willfully fails to comply with a wage garnishment order, it will face severe penalties and other negative consequences.
A wage garnishment results when a creditor sues you, obtains a judgment against you, and then forwards the court order to your employer. (To learn more, see our Wage Garnishment area.)
Regardless of how your employer pays you, whether by cash, check, or direct deposit, it must withhold the funds as directed in the garnishment order. Depending on your state’s laws, your employer must then send those funds to the garnishing court’s registry or directly to the creditor that obtained the judgment.
If your employer receives the wage garnishment order from the court and refuses to withhold your earnings as directed, it faces severe repercussions such as contempt of court or trouble with the IRS.
If your employer does not comply with the wage garnishment order, the creditor may ask the court to hold your employer in contempt. A finding of contempt may result in significant fines and possibly even jail time. As a last resort, the court may even hold your employer responsible for the judgment that the creditor originally obtained against you. Your employer would also be liable for any costs of the litigation including court filing expenses and attorney’s fees.
The Internal Revenue Service combined with the Department of the Treasury act as an additional check and balance against employers who evade garnishment orders.
Federal law requires your employer to report any income distributed to you as compensation for employment. Based on your type of employment, your employer must submit a form 1099 or W2 to the IRS at the end of the tax year.
Failing to report an employee’s income to the IRS constitutes a federal offense. The legal ramifications of this offense range from extremely severe fines to imprisonment.
If you are facing wage garnishment, you may be able to take steps to avoid the garnishment or limit the amount of wages garnished. To learn more, see the articles and Q&As in Wage Garnishments and Attachments.