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Davis Brown Tax Law Blog

Can the Iowa Department of Revenue Really Garnish 100% of My Wages? - September 6, 2013

The short answer: YES.  Iowa Code § 422.26 allows the Iowa Department of Revenue to obtain a lien over a taxpayer for any tax and penalties imposed for failure to properly pay taxes and to proceed to collect all such taxes and penalties as soon as practicable.  This statute also specifically states that “[N]o property of the taxpayer is exempt from payment of the tax.”

While there are other statutes which seem to exempt certain property from creditors (such as wages, a house, an engagement ring, family bibles, portraits, alimony, etc.), the Supreme Court of Iowa in Iowa Department of Revenue and Finance v. Peterson, held that these exemptions do not apply to tax claims against a taxpayer.  As part of its rationale it stated that “[t]he Iowa legislature has the power to establish an exemption and the power to take the exemption away.”

So where does this leave taxpayers?  In an extremely tough position.  The Iowa Department of Revenue could effectively run a taxpayer into bankruptcy by taking all of their assets, the clothes off their back, their personal property, and 100% of their wages and ultimately, the tax liabilities may not even be dischargeable in bankruptcy.  

In the end, this statute makes it very important for taxpayers to stay current on their tax liabilities and enter into payment plans right away with the Department so that they do not seek to enforce other collection measures such as garnishment.