How Does IRS Garnishment Affect Independent Contractors and Small Business Owners?

Running your own business or working as an independent contractor gives you freedom, but it also means you’re solely responsible for your taxes. If you fall behind, the IRS has powerful collection tools at its disposal—including IRS Garnishment. Unlike employees who receive a paycheck from an employer, contractors and business owners often face garnishments in ways that directly disrupt their income and client relationships.

In this guide, we’ll explain how IRS garnishment works, how it impacts independent contractors and small business owners, and what steps you can take to stop or prevent it.

What Is IRS Garnishment?

IRS Garnishment is the legal process the IRS uses to collect unpaid taxes by seizing a portion of your income or assets. Unlike private creditors, the IRS doesn’t need to go through the courts—it has the authority to garnish directly after sending required notices.

For independent contractors and small business owners, garnishment doesn’t always look the same as it does for traditional employees. Instead of wages, the IRS may target your client payments, accounts receivable, or even credit card processing income.

How IRS Garnishment Targets Independent Contractors

Independent contractors often don’t have a traditional employer. That means the IRS looks for other ways to intercept your income, such as:

• 1099 Income Seizure – The IRS can notify your clients and require them to send a portion of your payments directly to the government.

• Accounts Receivable Garnishment – If customers owe you money, the IRS can demand payment from them instead of you.

• Bank Account Levies – Funds in your business or personal bank accounts can be frozen and taken.

These actions not only reduce your cash flow but also alert your clients to your tax issues, which can damage your reputation and professional relationships.

How IRS Garnishment Affects Small Business Owners

For small business owners, the IRS has several garnishment tools that can disrupt operations:

• Business Bank Accounts – Garnishment can freeze funds needed for payroll, supplies, and operating expenses.

• Merchant Accounts – Credit card processors can be ordered to divert revenue to the IRS.

• Vendor and Customer Payments – If others owe money to your business, the IRS can intercept those funds.

In many cases, business owners are left struggling to pay employees, cover overhead, or keep the doors open.

What Are the Consequences of IRS Garnishment?

The effects of IRS Garnishment on contractors and business owners can be severe:

• Loss of essential operating funds

• Strained client or vendor relationships

• Risk of missed payroll or contract obligations

• Damage to business reputation

• Increased financial stress and potential closure

Without intervention, garnishments typically remain in place until the tax debt is fully paid or resolved through a formal IRS program.

How Can You Stop IRS Garnishment?

The good news is that garnishments can be stopped or reduced—but it requires swift action. Options include:

• Negotiating an Installment Agreement – Setting up a structured payment plan.

• Offer in Compromise (OIC) – Settling your tax debt for less than you owe.

• Currently Not Collectible (CNC) Status – Proving financial hardship to pause collections.

• Appealing IRS Action – If proper procedures weren’t followed, you may have grounds to stop garnishment.

With representation from a tax professional—especially one with IRS experience—you can protect your rights and explore all available relief options.

Why Work With ALTA Tax Relief?

At ALTA Tax Relief, our team is led by a former IRS employee who understands exactly how garnishments work—and how to stop them. We don’t just end the immediate garnishment; we also address the root tax problem so it doesn’t happen again.

• Direct access to an experienced tax resolution specialist

• Fast response to IRS levy and garnishment actions

• Personalized solutions for both individuals and businesses

• Proven results helping clients save money and stop collections

Take Back Control From IRS Garnishment Today

If you’re an independent contractor or small business owner facing IRS Garnishment, don’t wait for the IRS to drain your income or business accounts. The longer you wait, the harder it is to recover.

Call ALTA Tax Relief today at (252) 203-0732 to schedule your FREE 30-minute consultation with a former IRS professional.

ALTA Tax Relief – Trusted Help to Stop IRS Garnishment and Protect Your Business.