Anyone who runs a business likely had to deal with wage garnishment for one of their existing employees. It is the process of holding funds earned by your employees or contractors and giving a percentage of those funds directly to the government.
Why does this happen? Well, either the courts decided they owe a third party money and for some reason the employee/contractor isn't paying, thus they put the burden on the company that is paying the employee/contractor. Or they owe the government taxes and for some reason they aren't paying that either. Yes, it might be a dispute and the other party might be wrong, but the courts decided who was right and thus judgement has been set.
I personally never knew that the government goes to Google to withhold AdSense earnings from a publisher. But it happens.
A WebmasterWorld thread has two stories from different publishers, both who experienced their AdSense income being garnished by the government.
One who was hit by this shared his personal experience:
You will not get a payment check from Google, or any other company that may have gotten the same letter. They are BOUND BY LAW to withhold your payments, until they get ANOTHER LETTER, clearing them of the responsibility. (Your debt is now their responsibility as well)
In my case, I called the IRS immediately and paid off the debt. It was the ONLY way to immediately get it cleared up and remove the garnish, even if they are wrong! After the debt is cleared up, THEN you can figure out why it got to that point.
If you don't clear it up immediately, they will just keep coming, The IRS does not go away. One day you will go to get gas in your vehicle and the card wont work... because your bank accounts were frozen. If you cannot afford to pay them right now... they will let you setup a pay plan, but ALL GARNISH ORDERS will remain in effect until your debt is paid in full, and the companies are released of their liability.
From my experience, I only had to withhold a percentage of the employee's earnings, not all of it. So I am not sure why Google would hold ALL of the money but I do not have experience with wage garnishment for independent contractors nor with AdSense.
Forum discussion at WebmasterWorld.