Enforced Collections

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Attachment

Garnishment

Attachment and Garnishment

Enforced collection by reaching intangible personal property belonging or due to the taxpayer.

Wages

Salaries

Rents

Bank deposits

Proceeds from levy

Property in the Escheat Fund.

Attachment and GarnishmentThe Price is Right!

Court orders or special authorization by governing body is not necessary.

For each process served, a fee of $15.00 can be added to the account (NCGS§ 7A-311). The fee is collected as part of the tax. In cases of multiple actions (garnishment and attachment) the taxpayer’s service fee is only added once.

The GarnisheeThis is the person who has possession of the

taxpayer’s property or owes the taxpayer money.

The moment the notice of attachment and garnishment is served on the garnishee, any property in his hands are frozen, and the garnishee pays it out to the taxpayer at his own peril.

Once the notice is served, the garnishee must remit amounts of money or property sufficient to satisfy the tax claim as these amounts become due the taxpayer.

• Additional notices not necessary unless claim is not satisfied by the close of the calendar year.

The GarnisheeWhen the property subject to attachment and garnishment is wages or other compensation for personal services, the garnishee (employer) is directed to remit only 10% of the wages per pay period.

If the employer remits more than 10%, it’s not the collector’s concern - it is a matter between the employer and the taxpayer.

The NoticeMust meet requirements of G.S. 105-368(b) and

contain:1. Name, address & (if known) Social Security number or federal

tax identification number of the taxpayer.

2. The amount of taxes, penalties, interest, costs, and the year oryears for which the taxes were imposed.

3. The name of the taxing units.

4. A brief description of the property to be attached.

5. A copy of the applicable law (G.S. 105-366 and 368).

Service of NoticeMay be served by the tax collector, deputy tax collector, employee of the tax collector, sheriff, or deputy sheriff.

May be served in person to a responsible party.Personal service is a good idea if the garnishee is new to this concept.

Registered or certified mail.Service by first class mail is NOT authorized.

Service by publication.

Service of NoticeOn whom must the notice be served?

“upon the taxpayer and the person owing or having in his possession the wages, rents, debts, or other property sought to be attached…” (G.S. 105-368(b)

Personal service: delivered directly to the garnishee or the taxpayer, or to a responsible person residing at the address.

If mailed: registered or certified mail with return receipt requested.

Service of NoticeIf the garnishee is a corporation, the notice must be delivered or mailed to:

“an officer, director, or managing agent of the corporation or…copies thereof (must be left) in the office of such officer, director, or managing agent with the person who is apparently in charge of the office.”

Statute does not require the taxpayer and garnishee to be served simultaneously.

If the subject of the attachment is a bank account, common sense dictates serving the bank first.

If the subject is wages, serving the taxpayer first may allow him to avoid the embarrassment of the attachment.

Response to NoticeGarnishee has 10 days in which to respond.

If no defense or setoff, the garnishee must remit the amount demanded to the extent of the garnishee’s obligation to the taxpayer.

If a defense or setoff is raised, G.S. 105-368(d) requires the garnishee to state such in writing under oath and send two copies to the collector by certified mail within 10 days of service.

A “defense” is any legal impediment; for example, the taxpayer is not employed by the garnishee, or the bank account is closed.

A “setoff” is a private obligation between the taxpayer and garnishee whereby the taxpayer owes a debt to the garnishee; for example, an advance of wages.

Response to NoticeIf a defense or setoff is asserted, the collector

must decide whether to allow it.If accepting it in whole or part, the collector must notify the garnishee within 10 days of receiving the statement; the garnishment is discharged by the amount involved in the defense or setoff accepted.

If not allowing the defense or setoff, the collector must provide the garnishee written notice within 10 days of receiving the garnishee’s statement.

At the same time, the collector must file copies of the original notice, the garnishee’s response, and the collector’s objections in the appropriate division of the General Court of Justice. These documents will serve as a complaint in a civil action against the garnishee.

Response to NoticeTaxpayers may raise defenses in the same manner as

provided for the garnishee.Possible defenses include the taxes are paid, the tax is a result of a double or incorrect listing, did not own the property on January 1, etc.

If the garnishee does not respond within 15 days after service, G.S. 105-368(e) provides that the collector may file the garnishment documents in the appropriate division of the General Court of Justice and request that a judgment be entered against the garnishee.

Response to NoticeA letter or telephone call could remind the garnishee of the seriousness of ignoring the garnishment.

If court action becomes necessary, the fees and costs of the action are paid by the loser.

A judgment against the garnishee means they are now liable for all costs of the court action PLUS the taxes, interest, costs and penalties included in the garnishment.

What if the taxpayer’s property is no longer in the hands of the garnishee?

Garnishment/Attachment TidbitsMay a tax collector attach bank accounts or wages when

the bank or employer is located outside of the taxing unit? Or when the taxpayer has left the taxing unit?

If the garnishee is in the taxing unit but the taxpayer has left, the tax collector can attach the property in the garnishee’s hands.

Taxpayer can be served notice by sending a copy of the notice to the sheriff of the county in which the taxpayer is known (or believed) to be.

Good luck if the taxpayer is out of state!

YES!

Garnishment/Attachment TidbitsWhat if the garnishee - and therefore the property to be

attached - is outside the taxing unit, within North Carolina?

Provisions of G.S. 105-364

Governing board’s order of collection has the force and effect of a judgment; a valid judgment may be executed anywhere within the state.

G.S. 105-368(h) provides for the attachment of the wages of state employees - such notice is served in Wake County.

Set-offs must be filed in the county in which the garnishee resides. This implies that garnishees may reside outside the taxing unit.

Express provision is made in Chapter 1 attachment statutes for attaching a defendant’s property located anywhere in the state.

YES!

Rent AttachmentHow do you know the taxpayer owns rental

property?Things to look for:Owns multiple propertiesMailing address is different than property addressAccurint search for property address shows separate individual than taxpayer residing on the propertyField visit

Rent AttachmentsServe the taxpayer-property owner and the renter.It is good practice to serve the renter in person as

they generally have questions and concerns about paying their rent to the tax office and not the owner.

The renter(s) will be required to pay his/her rent to the tax office each month until all outstanding taxes are paid in full.

When the tenant is served, they tend to start making phone calls to the owner or property manager – so let them help you get the bill paid!

Escheats GarnishmentsUnclaimed funds held by the North Carolina State Treasurer can be garnished by serving them as the garnishee and serving the taxpayer.

1 out of 6 citizens in North Carolina currently have unclaimed funds being held in their name (www.nccash.com)

Garnishments can be done on individual and business taxpayers (even businesses who have gone out of business)

Tips for Escheats GarnishmentsProcedure - also falls under GS §105-368 “the tax collector may attach wages and other compensation…including property held in the Escheat Fund”

Remember that the claims at the Treasurer’s office are by last known addresses of the individual (according to holder, or company who turned over the funds). Submit paperwork listing the known addresses of the taxpayer that match the address on nccash.com with your garnishment form.

Never use the claim from on the Treasurer’s website.

Address Example

The address on our system

The address on nccash.com

Address ExampleWe had to verify if Omar ever lived at the address the Treasurer had listed. We searched on Accurint using our taxpayer’s known SS#.

Address ExampleWe were able to find that the Omar on our system matches the Omar on theirs.Since his current mailing address does not match what they have on file, we will send our garnishment form (with his current address) and also a cover letter giving them the address that matches what is on their system.

Escheats GarnishmentsThese entities represented here today currently have unclaimed

property with the State Treasurer!

Alamance County Tax Admin Carteret County Tax CollectorCity of ConcordForsyth County Tax AdministrationHenderson County Tax Admin Lincoln County Tax CollectorNash County Tax CollectorRockingham County Tax Depart

Stanley County TaxStokes County TaxUnion CountyVance County Tax AdminVillage of Lake Park

That’s 1 out of 4 of us!

Special Notes

How to Find the property:• Tax listings

• Copies of checks

• Ask the bank

• Utility payments

• Lists of employees

• Internet

• Employment Security Commission

• Rent rolls

Special SituationsGarnishing Salaries & Wages of Government

EmployeesEmployees of the State of North Carolina and Local Government Employees

State Employees: The notice of garnishment must be served upon the taxpayer and on the head or chief fiscal officer of the department, agency, instrumentality of institution which employs the taxpayer.

Local Government Employees: The notice must be served upon the taxpayer and the officer charged with making up the payrolls.

Public School Employees: The notice must be served on the taxpayer and on the payroll officer of the school administrative unit.

Special Situations

Federal EmployeesFederal employees no longer enjoy immunity to state

garnishment orders.

Federal Employees subject to garnishment:

All civil service employees in the executive branch.

All members of the armed forces (discussed later).

Members of the Federal judiciary, employees of clerks’ offices, judges.

Congressional staff members, members of Congress.

Employees of the Postal Service.

Garnishments should be served in a manner similar to those for State employees.

Special Situations

Federal EmployeesThe federal statutes allow 30 days for the agency to respond (taxpayer still only has 10 days).

Special procedures for members of the uniformed forces (the armed forces, commissioned corps of the Public Health Service and the National Oceanic and Atmospheric Administration).

The tax on which the garnishment is based must be “determined by the final judgment of a court of competent jurisdiction.” Therefore, the garnishment must be in the form of a judgment.

Costs and fees must be satisfied by the garnishee.

Special NotesBank Accounts

Although a bank cannot be forced to reveal whether a particular taxpayer has funds on deposit, the bank does not appear to be prohibited from releasing this information to the tax collector.

Word of advice - develop a relationship with the bank employees that deal with your attachments.

Procedure is same as for other intangibles:Serve the bank FIRST, then the taxpayer.

Service on the local branch is sufficient for all branches.

Special NotesGarnishment of Wages - General Practices

In January most collectors request each major employer to submit lists of its employees with full names and addresses (G.S. 195-368(I)).

If the list is not furnished, G.S. 105-368(I)(2) states that failure to comply is a misdemeanor.

It is also a misdemeanor for a collector to release the names on such lists to unauthorized persons or to allow the lists to be used for purposes other than the collection of taxes.

Employers are not required to provide Social Security numbers.

Special NotesGarnishment of Wages - General Practices

Lists are compared with unpaid bills.

Results are usually large numbers of very accurate garnishments.

Many collectors - as an administrative practice - simply stop calculating interest as of the date a garnishment is served. This is not allowable by statutes .

A well-designed tax listing form is a good way to ask for employers, telephone numbers, and Social Security numbers.

The Employment Security Commission allows tax collectors to have access to their database for employment information. (Need SSN)

Special SituationsCertain Benefits are Exempt from Attachment

and Garnishment.Social Security & Veteran’s Benefits Are Exempt Before and After Payment!

Worker’s compensation, retirement benefits for teachers, local and state employees, unemployment compensation benefits are all exempt from DIRECT garnishment.

These funds can be attached after deposit in a bank account.

Special Situations

The State and Federal Government may also file garnishments.

No provision for a State or Federal garnishment to be satisfied before a local collector’s garnishment takes effect.

Taxpayer may argue that the REMAINING portion of his income should be subject to the garnishment.

Other Collections

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Notices

Creative Ideas

Effective Notices!

Last Notice before Advertisement

Required to provide notice to the January 6th owner by statute.  Some jurisdictions use this notice as their second notice and advertisement notice combined. 

Consider how many of your taxpayers pay when they receive this warning! 

Pre‐foreclosure notices sent to taxpayer  

and Mortgage Lienholder

Bonus Notices!Don’t have bank account information on your taxpayer? Try sending the taxpayer a bluff bank attachment letter!

Not Real

Bonus Notices!Pre-Levy for Business Personal Property Accounts

Bonus Notices!Second Notice for Motor Vehicles

Bonus Notices!Pre-Levy Notice for Motor Vehicles

Bonus Actions!Utilize technology! Durham County uses a system by ELSAG – a license plate recognition system.

Cameras mounted to the

Deputies Vehicles read license plates

that are delinquent and placed in the database for collection.

Bonus Actions!

Main Car System Screen

An alert sounds, letting the Deputy know that there is a car with delinquent taxes due.

The Deputy leaves one of these notices letting the taxpayer know they have 24 hours to pay their delinquent taxes.

Bonus Actions!Consider turning delinquent accounts over to an outside collection agency

A taxpayer receiving a letter from a collection agency threatening to turn their delinquent taxes over to the credit bureau can be a very effective tool.

Teamwork!GS §105-364 Collection of taxes outside the taxing unitIt is the duty of the Collector!

If the taxpayer has no personal or real property subject to taxation in the taxing unit but has personal property in anothertaxing unit in North Carolina.Or, if the taxpayer has removed from the taxing unit, leaving nopersonal or real property subject to the tax lien there, and is known to be in another taxing unit in North Carolina.

The Tax Collector shall forward the tax receipt with certification stating that the taxes are unpaid for collection to the Tax Collector of the taxing unit where the taxpayer is known to havepersonal property.

Teamwork!Durham County received certification of taxes on Lee’s 24 Hour

Towing for $11,259.61 on March 3, 2010 from Orange County.Durham County attached a fee of 10% (GS §105-364(c)(1) and

served a levy on Lee’s 24 hour Towing.On April 1, 2010, Orange County was paid in full ($11,259.61) and

Durham County received the 10% ($1,125.95) which was paid into the general fund.

Time to Play!You are processing a Wage Garnishment to Duke University on Delinquent Joe

At the same time you are also processing a Bank Attachment to State Employee’s Credit Union on Delinquent Joe.

What total fee will be added to Joe’s account?