1. Other Deductions From Pay

2. Type of Deductions Involuntary Deductions Voluntary Deductions
Those over which an employer or employee have no control
Employer is required by law to deduct amount from employee and remit the funds to satisfy the employee’s debit
Employer failure to deduct from the employee creates an employer liability equal to the amount required to be deducted, plus fines and interest
Voluntary Deductions
Employer or employee has control over amount to be deducted

3. Tax Levies
Form 668-W, Notice of Levy on Wages, Salary, and Other Income
6-part form
Parts 2 – 5 are given to employee
Employee returns Parts 3 & 4 to employer
Must be returned within 3 days
Use married filing separately with 1 personal exemption if not returned
Only Child Support has a higher deduction priority
Use tax table for the year that the employee signed the document or received from the IRS
Form 668-D, Release of Levy/Release of Property from Levy
Form 2159, Payroll Deduction Agreement --- valid once signed by IRS

4. Tax Levies Publication 1494 is used to determine exempt amount
What the employee takes home!
All deductions on employee’s pay freezes while levy is in place
Employer rates can change
Employee cannot make W-4 or benefit changes that would allow a higher take home pay
All amounts paid to the employee are subject to the levy unless IRS indicates otherwise on the levy
Penalty of 50% plus full amount of levy plus interest for failure to deduct and remit

5. Disposable Earnings
Determined by subtracting all deductions required by law from the employee’s gross earnings.
Deductions required by law:
Tax withholdings
Mandated payments
Union Dues if required for employment
Check the state requirements!
Deductions not required by law:
Deferred compensation elections
Voluntary deductions

6. Child Support Withholding Orders
Enforcement is a joint responsibility between federal and state governments
Have a highest deduction priority of all involuntary deductions
Withholding laws are based on the Consumer Credit Protection Act (CCPA)
50% of disposable earnings if the employee is supporting another family
60% of disposable earnings if the employee is not supporting another family
Additional 5% of disposable earnings if the employee is at least 12 weeks in arrears

7. Child Support Withholding Orders
Must honor orders that are ‘regular on its face’
All payments are now sent to state disbursement units except South Carolina
All states and possessions except Guam, South Carolina, and the Virgin Islands use the Office of Child Support Enforcement (OCSE) electronic system
Employer can collect an administrative fee for processing the IWO
Use state laws where the employee works, not state order is from

8. Child Support Withholding Orders
International Child Support Enforcements
Hague Child Support Convention became effective January 1, 2017
States can process cases with other countries that have ratified the Convention under the requirements of the Convention and Article 7 of the Uniform Interstate Family Support Act (UIFSA).
Multiple IWOs
Follow the laws in the state the employee works
Options:
Allocated based on percentage in relation to the total amount
Allocated against available wages equally amount all orders
Deduct / remit first received, then subsequent orders in order received

9. Child Support Withholding Orders
Watch out for the following events! Action needs to be taken.
Employee goes on active military leave
IWO received on independent contractor
Employee receives a lump sum payment
Medical Support Notice is received
Be sure to notify agency when an employee is terminated
Keep deducting until you receive a termination

10. Creditor Garnishments
A legal means by which the creditor can obtain payment
a/k/a wage attachment or income execution
CCPA places restrictions on states in their regulation of creditor garnishments
Limits amount that can be garnished, the lessor of:
25% of the employee’s disposable earnings for the week
Amount by which the employee’s disposable earnings for the week exceed 30 times the federal minimum hourly wage in effect
Watch state laws for multiple creditor orders acceptability
Watch state laws for allowing creditor garnishments

11. Bankruptcy Orders Governed by federal Bankruptcy Code
Chapter 13 (XIII) orders take priority over any other claim except child support.
All other orders halt once notification is received of Chapter 13 filing. Be sure to verify the creditor list against active withholding orders.
401(k) loans cannot be included in Chapter 13 filing.
Payments are sent to Trustee listed on order

12. Student Loan Collections
Higher Education Act allows garnishments to repay delinquent loans
Amount subject to garnishment is the lesser of:
15% of employee’s disposable earnings
Excess of disposable earnings over 30 times the federal hourly minimum wage in effect
Multiple loans can go up to the lesser of:
25% of employee’s disposable earnings
Employee must be given 30 days notice before start of withholding
Rehired employee: wait 12 months before restarting withholding

13. Federal Agency Debt Collections
Debt Collection Improvement Act of 1996
Allows federal government agencies to garnish wages of individuals who fail to repay their debt according to the agreement with the agency.
Amount subject to garnishment is the lesser of:
15% of employee’s disposable earnings
Excess of disposable earnings over 30 times the federal hourly minimum wage in effect
Multiple loans can go up to the lesser of:
25% of employee’s disposable earnings
Rehired employee: wait 12 months before restarting withholding

14. Voluntary: Wage Assignments
Agreement to have a portion of the employee’s wages assigned to a third-party.
Not governed by the CCPA
Watch the state laws! Not allowed in some states unless IRS agreement.
Agreement must be in writing
Employer discretion on whether to withhold / remit

15. Voluntary: Union Dues
Possible mandatory deduction required by a collective bargaining agreement
Voluntary is authorized by federal labor law, Labor Management Relations Act
Amount withheld is only for union dues, initiation fees, and assessments

16. Voluntary: Charitable Contributions
Omnibus Budget Reconciliation Act of 1993 (OBRA)
Created IRC §170(f)(8)
Prohibits taxpayers from deducting charitable contributions of $250 or more without substantiation of the gift and substantial goods or services received in return
Written communication from the charitable organization on contributions of any amount provided by payroll deduction
Pay stub, Form W-2, or other document provided by employer that shows the amount withheld during a taxable year
Pledge card or other documentation prepared showing the name of the charitable organization

17. DO YOU KNOW???
What is the amount that will garnished from an employee’s pay to satisfy a delinquent federal agency loan?
Does an employer have to withhold child support from payments to independent contractors?
What is the CCPA?
How is take home pay calculated?
How does Form 668-W define an employee’s take home pay that is subject to a federal tax levy?
How does the CCPA affect child support withholding?