The A to Z of Garnishments 1 ©2013 The Payroll Advisor
The A to Z of Garnishments 1 ©2013 The Payroll Advisor Part 2: The Laws Governing Tax Levies and Other Garnishments Presented Tuesday, June 4, 2013 2 ©2013 The Payroll Advisor BROUGHT TO YOU BY HRCI CreditRCH Credit To earn RCH, you must: • Stay on the webinar for the full 60 minutes • Be watching the webinar using your unique URL • Certificates will be delivered electronically to email that you used to register for this webinar • Sent to you no later than 7/4/13 How to ask questions… HRCI Credit About the Speaker 6 Vicki M. Lambert, CPP, is President and Academic Director of Vicki M. Lambert, LLC, a firm specializing in payroll education and training. Known as “The Payroll Advisor,” Ms. Lambert is Founder and Director of www.thepayrolladvisor.com, a website that provides unique and expert services for anyone dealing with the complexities and technicalities of the payroll process. As an adjunct faculty member at Brandman University, Ms. Lambert is the creator and instructor for the Practical Payroll Online payroll training program, which is approved by the APA for recertification credits. What Is Our Focus For Today? 7 Terms, Definitions and Priorities Laws and Regulations Federal Tax Levies Federal Agency Debt Collections State Tax Levies Creditor Garnishments Voluntary Wage Assignments Bankruptcies Student Loans ©2013 The Payroll Advisor Types of Deductions 8 Voluntary—credit union deduction for example Involuntary—taxes for example Garnishments are involuntary—someone else requests them other than the employee ©2013 The Payroll Advisor Garnishment 101 9 Many different types of garnishments can be received by one payroll department Can be Both Federal and state Employees can have more than one type Employees could have more than one for each type! ©2013 The Payroll Advisor Definition of Garnishment 10 Legal procedure through which the earnings of an employee are required by court order to be withheld by an employer for the payment of a debt. ©2013 The Payroll Advisor Usual Suspects 11 Child Support Federal Tax Levy Federal Agency Debt Collection State Tax Levy Creditor Student Loans* *Not really sure where they fit in until Bankruptcies* received ©2013 The Payroll Advisor Exceptions on Priority 12 Federal tax levy is received prior to child support order Federal Agency Debt received prior to tax levy Bankruptcy may include other levies and child support and therefore goes first Student loans fall in with creditor State tax levy and creditor depend on state requirements ©2013 The Payroll Advisor Consumer Credit Protection Act 13 Limits the amount that can be deducted from “disposable pay” for child support and creditor garnishments Limits apply if more than one garnishment is in effect Does not apply to federal or state tax levies ©2013 The Payroll Advisor A Garnishment is Received in Payroll 14 Several steps payroll needs to do before processing on the payroll system Should set up written procedures so all in department follow the same methods Will be discussed in Part 3 ©2013 The Payroll Advisor Terminating Employees 15 Garnishments and tax levies are a per payroll event Take normal deduction Do the required notifications Watch for the state tax levies— may require entire amount taken ©2013 The Payroll Advisor Federal Tax Levies 16 Form 668-W Notice of Levy on Wages, Salary and Other Income Amount of deduction based on Publication 1494 Chart lists amount exempt from levy Deduct from “take home pay” ©2013 The Payroll Advisor Form 668-W 17 Six part form (Part 6 retained by IRS) Part 1—Employer’s copy Parts 2-5 Given to employee Part 2 – Employee’s copy to keep Parts 3-5 require employee to complete information Part 3 and 4 are returned to employer within 3 days ©2013 The Payroll Advisor Form 668-W 18 Employee keeps part 5 Payroll gets back parts 3 and 4 Payroll keeps Part 4 and sends in Part 3 If not received use married filing separately plus one personal exemption Do not use Form W-4 Use same chart even if year changes unless employee submits new form ©2013 The Payroll Advisor 19 20 21 22 23 Allowances On Part 3 24 Employee completes this part Employee counts as one exemption as well You may add the employee if they fail to do so since you have the social security number SSN must be there for all exemptions or they don’t count ©2013 The Payroll Advisor Answering Back 25 Form 668-W has a required response back from the employer Send in with the first payment Make copies for yourself for when employee terminates ©2013 The Payroll Advisor 26 What is Meant by Take Home Pay 27 Subtract the following in calculating take home pay: Taxes Voluntary and involuntary deductions in effect before the levy is received Increases in preexisting deductions beyond the employee’s control Condition of employment deductions that come after the levy is received Direct deposit is not counted ©2013 The Payroll Advisor Determining Amount Exempt from Levy 28 Publication 1494 is used to determine the amount exempt from levy Changes each year Use the exemptions and filing status the employee submitted on the Form 668-W ©2013 The Payroll Advisor 29 30 ©2013 The Payroll Advisor Paying the Levy 31 Pay on the same day that payments are made or are due to employee Complete back of Part 3 of form with first payment Make payable to “United States Treasury” Put information on check not stub ©2013 The Payroll Advisor Stopping the Levy 32 Must receive Form 668-D IRS wants you to continue to withhold until release is received even if it exceeds amount on levy Call when you are getting close! ©2013 The Payroll Advisor 33 ©2013 The Payroll Advisor 34 35 36 75 37 X 38 185.75 500 5/30/13 X 39 5,000 Month X Terminating Employees 40 Must take out of final paycheck Must notify IRS of termination Use copy of answer back section ©2013 The Payroll Advisor 41 Between Employees and the IRS 42 New at the IRS—online payments Employee fills out application online Makes payments online Must still get Form 668-D to the employer Can encourage employees to use ©2013 The Payroll Advisor Voluntary Deduction Agreement 43 Form 2159 “Payroll Deduction Agreement” Totally voluntary on both sides Still need release form to stop original levy Six-Part Form ©2013 The Payroll Advisor 44 ©2013 The Payroll Advisor 45 Federal Agency Debt Collections 46 Student loans not the only kind of federal debt subject to garnishment Fail to pay nontax debt Subject to CCPA as well as Debt Collection Improvement Act of 1996 Includes vendor, federal retirement, federal salary, and social security benefits ©2013 The Payroll Advisor Federal Agency Debt Collections 47 Disposable pay includes all wages and salary including vacation pay Deductions include all mandated deductions plus health insurance premiums Lesser of: 15% of disposable pay or amount that exceeds 30 times the current minimum wage ©2013 The Payroll Advisor Federal Agency Debt Collections 48 Has priority if served first But not over child support even if it comes later An amount equal to 25% of disposable pay less the amount(s) withheld under the withholding order(s) with priority Begin when the order says to End when release is received ©2013 The Payroll Advisor State Tax Levies 49 CCPA limits do not apply to state tax levies under 15 USC 1673(b)(1)(c) COULD BE 25% of disposable or the amount that exceeds 30 times the federal minimum hourly wage COULD BE anything they want it to be—Example KY allows employee to keep $125/week Plus $60 for each dependent COULD come on a tax levy form or COULD be a letter ©2013 The Payroll Advisor State Tax Levies 50 Disposable income could match federal or may not even give a definition May have priority over other creditor garnishments or it may not Answer back may or may not be required May be able to collect a fee Read the garnishment carefully ©2013 The Payroll Advisor Creditor Garnishments 51 CCPA limits apply except where state is lower 25% of disposable or the amount that exceeds 30 times the federal minimum hourly wage Some states have severe restrictions Federal chart furnished-as of July 2009 ©2013 The Payroll Advisor More 52 ©2013 The Payroll Advisor Disposable Income 53 Disposable Income = gross pay - mandatory deductions. Disposable income is the amount of earnings remaining after subtracting certain mandatory deductions from an employee's gross pay. Mandatory deductions include federal, state and local taxes; unemployment insurance; workers' compensation insurance; state employee retirement deductions; other deductions determined by state law. ©2013 The Payroll Advisor Disposable Income and Net Pay 54 Note that disposable income is not necessarily the same as net pay. An employee may have a deduction taken from his pay that is not mandatory, such as union dues or a car loan payment. Watch out for tips to be included Limit applies even to multiple garnishments Other garnishments are not subtracted before determining disposable pay ©2013 The Payroll Advisor State Examples 55 Illinois: The greater of 85% of weekly gross earnings or disposable earnings up to 45 times the federal minimum wage or 45 times the state minimum hourly wage, whichever is greater, is exempt from garnishment. ©2013 The Payroll Advisor State Examples 56 Nevada: The maximum that employers can withhold is the lesser of: 25 percent of disposable earnings or the amount by which weekly disposable earnings exceed 50 times the federal minimum wage. Disposable earnings are those remaining after deductions required by law. ©2013 The Payroll Advisor More State Examples 57 Hawaii: The maximum that employers can withhold is 5 percent of the first $100 of disposable wages per month, 10 percent of the next $100 per month, and 20 percent of all sums in excess of $200 per month. Disposable earnings are the amount of earnings remaining after the deduction of any amount required by law. ©2013 The Payroll Advisor More State Examples 58 Maine: The maximum that employers can withhold is the lesser of 25 percent of disposable earnings, or the amount by which weekly disposable earnings exceed 40 times the federal minimum wage. ©2013 The Payroll Advisor However, In North Carolina… 59 The courts of North Carolina are not permitted to order an employer to withhold wages for other types of debts such as car loans, credit card debt, and other personal debt items. While the North Carolina courts are not permitted to garnish wages based on these debts, creditors in other states may be able to get an order of garnishment under their own states’ laws. It is not a violation of the North Carolina Wage and Hour Act for an employer to withhold an employee’s wages if required to do so by law. If a court from another state issues a valid order under that state’s laws requiring an employer to withhold a North Carolina employee’s wages for payment of a debt, the employer does not violate the North Carolina Wage and Hour Act by obeying that order. ©2013 The Payroll Advisor State Fees 60 Collection of a fee for the employer is sometimes permitted For Example: Florida $5.00 for the first deduction processed; $2.00 for each deduction processed thereafter May also be a fee to collect for the state or court or plaintiff in the case Read the garnishment ©2013 The Payroll Advisor Voluntary Wage Assignment 61 Are not the same thing as a court-ordered garnishment Are voluntary so not covered under CCPA limits Can be revoked at any time by employee so watch for this State sets the limit and the rules State can forbid employer to honor, especially for “small loans” ©2013 The Payroll Advisor Bankruptcy 62 Governed by the federal Bankruptcy Act Chapter XIII bankruptcy orders take priority over any other claim against wages including child support and tax levies Should be included in bankruptcy—verify Get releases when required—child support Notify courts if child support is involved-No more automatic stays for child support ©2013 The Payroll Advisor Student Loans 63 Higher Education Act amended to allow for garnishment of wages to repay student loans 15% of disposable or 30 times federal minimum wage which ever is less Multiples can use the 25% garnishment limit ©2013 The Payroll Advisor Disposable Pay Is Defined As… 64 The employee’s compensation including salary, overtime, bonuses, commissions, sick leave and vacation pay minus any deductions for health insurance and deductions required by law. Deductions required by law or proper deductions include federal, state and local taxes; state unemployment and disability taxes; social security taxes; Medicare taxes; and involuntary pension contributions. ©2013 The Payroll Advisor But They Do Not Include… 65 Voluntary pension deduction or retirement plan contributions or union dues. A Wage Garnishment Worksheet is included with the Wage Garnishment Order to assist payroll in calculating disposable pay and the wage garnishment amount. ©2013 The Payroll Advisor Handling a Student Loan Garnishment 66 ED first notifies the employer that debtor pay must be withheld by sending a Wage Garnishment Order (SF329B) form Provides the debtor’s name, address, and social security number as well as instructions for withholding. The employer then: completes and returns the Employer Certification (ED-329D) within 20 days of receipt Begins withholding the amount directed in the order ©2013 The Payroll Advisor But What if the Employee is Gone? 67 If the debtor is no longer employed by your organization when you receive the Order, simply indicate this on the form and return it to ED or call the Administrative Wage Garnishment Branch at 404-5626013. ©2013 The Payroll Advisor Then Each Quarter… 68 ED will send the employer an Employment Confirmation Report to obtain any information needed regarding any changes to the employment status of the debtor. The Report lists the debtor/employee's account balance. Keep in mind that the balance shown on the Report reflects interest that has accrued since the Order was issued. In addition, ED has used part of the amounts withheld and paid to ED to defray collection costs ED incurs in collecting the debt. Questions or account balance call (404) 562 -6013. ©2013 The Payroll Advisor What We Covered Today… 69 Terms and Definitions for Garnishments Laws and Regulations Specifics for tax levies, Federal agency debt collection, creditor garnishments, student loans, voluntary wage assignments and bankruptcies ©2013 The Payroll Advisor Are There Any Questions? 70 HRCI CreditRCH Credit To earn RCH, you must: • Stay on the webinar for the full 60 minutes • Be watching the webinar using your unique URL • Certificates will be delivered electronically to email that you used to register for this webinar • Sent to you no later than 7/4/13 How to get the slides… HRCI Credit MORE 2013 RCH WEBINARS Best Practices for Navigating International Employment June 6, 10am PST The A-Z of Garnishments, Part 3: Best Practices to Follow and Getting the Math Right to Ensure Compliance June 11, 10am PST How Can Ascentis Help Me? 74 Paystub viewing, W-2 generation, & tax simulation too Quick and easy check generation Reporting Wizards allow you to create and access standard or custom reports in real time Dedicated expert payroll support Interfaces with 401(k) providers and accounting systems 75 www.Ascentis.com [email protected] 800.229.2713
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