Presentation on theme: "Garnishments BEYOND Child Support. Speaker Rosemarie Fraumeni, CPP Manager, Payroll American Dental Partners, Inc."— Presentation transcript:
Garnishments BEYOND Child Support
Speaker Rosemarie Fraumeni, CPP Manager, Payroll American Dental Partners, Inc. firstname.lastname@example.org
Rosemarie Fraumeni, CPP Certified Payroll Professional since 2000 BS in Accounting Involved in payroll since 1991 Member of APA’s National Speakers Bureau Certification Advisory Board – CPP Committee Government Affairs Task Force Member of the APA Boston Local Chapter Current Vice President Member of the New England Payroll Conference Committee Current Conference Chair and Treasurer APA Awards 2010 Payroll Woman of the Year Special Recognition 2008 Meritorious Service 2005
Agenda Involuntary deductions Federal tax levy State tax levy Student loan Creditor garnishment Bankruptcy Please Complete Your Evaluation at the End of the Workshop
Involuntary deductions Neither the employer nor employee have control
Employer’s responsibilities Is the claim valid? Inform the employee Are there employee exemptions? How will it affect employee’s pay?
Employer’s responsibilities Does it exceed any limits? Will it affect other deductions? Review with legal department
Deduction order 1.Child support 2.Bankruptcy 3.Federal administrative garnishment
Deduction order 4.Federal tax levy 5.Student loan 6. State tax levy
Deduction order 7.Local tax levy 8.Creditor garnishment 9. Voluntary deductions
Federal Tax Levy
IRS Tax Facts A delinquency investigation is opened when a taxpayer does not respond to an IRS notice of a delinquent return. In 2010, the Internal Revenue Service had over 3.6 million delinquency investigations. (Information obtained from IRS web site)
Why are you getting a levy? A levy is the result of the delinquency of an employee to pay owed tax liabilities
Form 668-W, Part 1 For Employer
Form 668-W, Part 3 I certify that I can claim the people named below as personal exemptions on my income tax return and that none are claimed on another Notice of Levy. No one I have listed is my minor child to whom (as required by court or administrative order) I make support payments that are already exempt from levy. I understand the information I have provided may be verified by the Internal Revenue Service. Under penalties of perjury, I declare that this statement of exemptions and filing status is true.
The federal tax levy “What is the priority of the federal tax levy as compared with other attachments?”
The federal tax levy Payments exempt from the levy Unemployment benefits Workers’ compensation payments Certain pension and annuity payments Certain disability and welfare payments Pre-existing involuntary deductions
The federal tax levy Wage exemption
The federal tax levy Publication 1494
2016 Levy deductions lasting into successive years The federal tax levy 2015 2014 2013 2012
SSubtract these before determining take-home pay… Taxes Existing deductions Some increases in existing deductions
Post-levy deductions or increases to existing deductions lower the exempt amount
The federal tax levy Payments of any type are subject to levy
The federal tax levy When do we stop withholding?
The federal tax levy Form 668-D
50 6003/11/12 242 X 5,000Month
When employment ends Complete the back side of 668-W, Part 3 and return it to the IRS
Voluntary agreement Employee may contact the IRS to negotiate a voluntary agreement
Voluntary agreement Employee may file Form 2159
State Tax Levy
CALIFORNIA – follows CCPA limits
State Tax Levy NEW YORK – 10% of gross earnings
State Tax Levy SOUTH CAROLINA – 25% of gross earnings
State Tax Levy IOWA – 100% of disposable earnings
State Tax Levy IDAHO – 100% of wages
Maximum deduction the lesser of: 15% of disposable earnings, or 30 times the federal hourly minimum wage Student Loan
Protection from discharge Student Loan
Notice before garnishment 30 days before withholding begins Student Loan
No guidance on priorities Student Loan
Grace period after reemployment 12 months Student Loan
Penalties Liable for any amount not withheld plus legal costs
What is a creditor garnishment? An employee has a debt that remains unpaid
A wage garnishment is a legal means by which the person who is owed the money can obtain payment What is a creditor garnishment?
Maximum amount of an employee’s “disposable earnings” Disposable Earnings
Disposable earnings = Gross earnings minus all deductions required by law Disposable Earnings
Deductions required by law include withholding: Federal, state, or local income tax Disposable Earnings
Deductions required by law include withholding: Mandated payments for state employee retirement systems
Maximum amount of an employee’s “disposable earnings” is lesser of: 25% of the employee’s disposable earnings for the week, or… Garnishment Limits
…the amount by which the employee’s disposable earnings for the week exceeds 30 times the federal minimum wage
State laws may still apply Garnishment Limits
State law garnishment limits apply when they require a lesser amount to be garnished
Federal Minimum Wage $7.25 per hour $7.25
Maximum Deduction AMOUNT SUBJECT TO GARNISHMENT Weekly NONE Disposable earnings are $217.50 or less: NONE AMOUNT ABOVE $217.50 Disposable earnings are more than $217.50 but less than $290.00: AMOUNT ABOVE $217.50 MAXIMUM 25% Disposable earnings are $290.00 or more: MAXIMUM 25%
State Rules STDisposable earnings Garnishment limits Administrative Fee AL That part of the earnings of a debtor remaining after deduction of amounts required by law to be withheld. Does not include periodic payments pursuant to a pension, retirement, or disability program. 75% of weekly disposable earnings exempt from withholding. No provision.
State Rules STDisposable earnings Garnishment limits Administrative Fee AZThat remaining portion of a debtor’s wages, salary or compensation for personal services, including bonuses, commissions, payments pursuant to a pension or retirement program or deferred compensation plan, after deducting from such earnings those amounts required by law to be withheld. CCPA limits. However, court may determine at a hearing that judgment debtor or his family would suffer extreme economic hardship as a result of the garnishment and reduce the amount of nonexempt earnings withheld under a continuing lien ordered from 25% to not less than 15%. $5 per pay period, deducted from nonexempt earnings of judgment debtor. If there is not enough income to collect the fee and it remains owed when the writ becomes invalid or is released, the uncollected fee is chargeable against the creditor, not the judgment debtor.
State Rules STDisposable earnings Garnishment limits Administrative Fee AKThe following will be treated as earnings: (1) Disability, illness, or unemployment; (2) alimony; (3) insurance proceeds; (4) amounts paid under a stock bonus, pension, profit-sharing, annuity or similar plan providing benefits. Net earnings of an individual are determined by subtracting from the gross earnings all sums required by law or court order to be withheld. $350 or $550, if individual’s earnings alone support household. Student loans: $5 per payment, deducted from other wages or salary owed to the borrower.
State Rules STDisposable earnings Garnishment limits Administrative Fee CA“Earnings” means compensation payable for personal services performed, whether denominated as wages, salary, commission, bonus, or otherwise. CCPA limits. However, portion of debtor’s earnings which is necessary for the support of the judgment debtor or family is exempt from levy. This does not apply if: (1) debt was incurred for common necessaries of life or incurred for personal services rendered for employer; (2) order is a withholding order for support or a state tax order. $1.50 per payment, deducted from employee’s earnings.
State Rules STDisposable earnings Garnishment limits Administrative Fee SCNo provision. Earnings of a debtor for personal services may not be garnished by creditors. No provision.
State Rules STDisposable earnings Garnishment limits Administrative Fee PA For purposes of amounts owed to creditor-landlord…, “net wages” means all wages paid less only the following items: federal, state and local income taxes; FICA payments and nonvoluntary retirement payments; union dues’ and health insurance premiums. Generally, wages salaries and commissions of employees are exempt from garnishment while in the hands of the employer… No provision.
State Rules STDisposable earnings Garnishment limits Administrative Fee TXNo provision.State constitution prohibits current wages for personal service to be subject to garnishment, except for the enforcement of court ordered: (1) child support payments or (2) spousal maintenance. No general provision
Multiple Garnishments Federal garnishment maximum applies no matter how many garnishments are received
Areas of state regulation The priority of multiple garnishments
Exceptions Wages subject to withholding for child support, tax levies, or bankruptcy orders are not considered deductions required by law
Exceptions Withholding for child support, tax levies, or bankruptcy orders are not to be subtracted from gross earnings
Areas of state regulation Time limits for remitting withheld amounts
Areas of state regulation Whether the employer can charge an administrative fee for processing the garnishment
Areas of state regulation The procedure to follow when an out-of-state garnishment order is received
Discharge Employers are prohibited by the CCPA from terminating an employee because of the employee’s one indebtedness
Bankruptcy Chapter 7 Liquidation of assets Cancellation of debts Start over
Bankruptcy Chapter 11 Business Reorganization Trustee pays creditors
Bankruptcy Chapter 13 Individuals Reorganization Trustee pays creditors