1. Garnishments BEYOND Child Support

2. Speaker
Rosemarie Fraumeni, CPP Manager, Payroll American Dental Partners, Inc.

3. 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

4. Please Complete Your Evaluation at the End of the Workshop
Agenda
Involuntary deductions
Federal tax levy
State tax levy
Student loan
Creditor garnishment
Bankruptcy
Please Complete Your Evaluation at the End of the Workshop

5. Involuntary Deductions

6. Involuntary deductions
Neither the employer nor employee have control

7. Employer’s responsibilities
Is the claim valid?
Inform the employee
Are there employee exemptions?
How will it affect employee’s pay?

8. Employer’s responsibilities
Does it exceed any limits?
Will it affect other deductions?
Review with legal department

9. Deduction order Child support Bankruptcy
Federal administrative garnishment

10. Deduction order
Federal tax levy
Student loan
6. State tax levy

11. Deduction order Local tax levy Creditor garnishment
9. Voluntary deductions

12. Federal Tax Levy

13. 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)

14. Why are you getting a levy?
A levy is the result of the delinquency of an employee to pay owed tax liabilities

15. Form 668-W

16. Form 668-W, Part 1
For Employer

17. 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.

19. The federal tax levy
“What is the priority of the federal tax levy as compared with other attachments?”

20. 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

21. The federal tax levy
Wage exemption

22. The federal tax levy
Publication 1494

24. Levy deductions lasting into successive years
The federal tax levy
Levy deductions lasting into successive years
2012
2013
2014
2015
2016

25. The federal tax levy Subtract these before determining take-home pay…
Taxes
Existing deductions
Some increases in existing deductions

26. The federal tax levy
Post-levy deductions or increases to existing deductions lower the exempt amount

27. The federal tax levy
Payments of any type are subject to levy

28. The federal tax levy
When do we stop withholding?

29. The federal tax levy
Form 668-D

30. 50
600
3/11/12
242 X
5,000
Month

31. When employment ends
Complete the back side of 668-W, Part 3 and return it to the IRS

32. Voluntary agreement
Employee may contact the IRS to negotiate a voluntary agreement

33. Voluntary agreement
Employee may file Form 2159

34. State Tax Levy

35. State Tax Levy
CALIFORNIA – follows CCPA limits

36. State Tax Levy
NEW YORK – 10% of gross earnings

37. State Tax Levy
SOUTH CAROLINA – 25% of gross earnings

38. IOWA – 100% of disposable earnings
State Tax Levy
IOWA – 100% of disposable earnings

39. State Tax Levy
IDAHO – 100% of wages

40. Student Loan

41. Student Loan Maximum deduction the lesser of:
15% of disposable earnings, or
30 times the federal hourly minimum wage

42. Student Loan
Protection from discharge

43. Student Loan Notice before garnishment
30 days before withholding begins

44. Student Loan
No guidance on priorities

45. Student Loan
Grace period after reemployment
12 months

46. Student Loan Penalties
Liable for any amount not withheld plus legal costs

47. Creditor Garnishment

48. What is a creditor garnishment?
An employee has a debt that remains unpaid

49. What is a creditor garnishment?
A wage garnishment is a legal means by which the person who is owed the money can obtain payment

50. What is a creditor garnishment?
“Wage attachment”
“Income execution”
“Writ” !”

51. Disposable Earnings
Consumer Credit Protection Act (Title III)

52. Disposable Earnings
Maximum amount of an employee’s “disposable earnings”

53. Disposable Earnings
Disposable earnings = Gross earnings minus all deductions required by law

54. Disposable Earnings Deductions required by law include withholding:
Federal, state, or local income tax

55. Disposable Earnings Deductions required by law include withholding:
Mandated payments for state employee retirement systems

56. Garnishment Limits
Maximum amount of an employee’s “disposable earnings” is lesser of:
25% of the employee’s disposable earnings for the week, or…

57. Garnishment Limits
…the amount by which the employee’s disposable earnings for the week exceeds 30 times the federal minimum wage

58. Garnishment Limits
State laws may still apply

59. Garnishment Limits
State law garnishment limits apply when they require a lesser amount to be garnished

60. Federal Minimum Wage
$7.25
$7.25 per hour

61. AMOUNT SUBJECT TO GARNISHMENT
Maximum Deduction
AMOUNT SUBJECT TO GARNISHMENT
Weekly
Disposable earnings are $ or less: NONE
Disposable earnings are more than $ but less than $290.00: AMOUNT ABOVE $217.50
Disposable earnings are $ or more: MAXIMUM 25%

63. State Rules ST Disposable 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.

64. State Rules ST Disposable earnings Garnishment limits
Administrative Fee AZ
That 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.

65. State Rules ST Disposable earnings Garnishment limits
Administrative Fee AK
The 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.

66. State Rules ST Disposable 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.

67. State Rules ST Disposable earnings Garnishment limits
Administrative Fee SC
No provision.
Earnings of a debtor for personal services may not be garnished by creditors.

68. State Rules ST Disposable 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.

69. State Rules ST Disposable earnings Garnishment limits
Administrative Fee TX
No 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

70. Multiple Garnishments
Federal garnishment maximum applies no matter how many garnishments are received

71. Areas of state regulation
The priority of multiple garnishments

72. Exceptions
Wages subject to withholding for child support, tax levies, or bankruptcy orders are not considered deductions required by law

73. Exceptions
Withholding for child support, tax levies, or bankruptcy orders are not to be subtracted from gross earnings

74. Areas of state regulation
Time limits for remitting withheld amounts

75. Areas of state regulation
Whether the employer can charge an administrative fee for processing the garnishment

76. Areas of state regulation
The procedure to follow when an out-of-state garnishment order is received

77. Discharge
Employers are prohibited by the CCPA from terminating an employee because of the employee’s one indebtedness

78. Bankruptcy

79. Bankruptcy Chapter 7 Liquidation of assets Cancellation of debts
Start over

80. Bankruptcy
Chapter 11
Business
Reorganization
Trustee pays creditors

81. Bankruptcy Chapter 13 Individuals Reorganization
Trustee pays creditors

82. Bankruptcy
Employee voluntarily declares bankruptcy

83. Bankruptcy
Employee is found to be bankrupt by a court

84. Bankruptcy
Stop withholding on any other garnishment order (except for child support)

85. General Rules
Continuing to withhold and remit other orders could result in a creditor receiving double payments

86. General Rules
Continue to withhold for other garnishments only if the trustee specifically provides instructions to do so

87. Bankruptcy
An amount of the employee’s wages are withheld and paid to the trustee

88. Bankruptcy
The payment to the employee’s creditors is handled by the “bankruptcy trustee”

89. Bankruptcy
The payment satisfies the employee’s creditors

90. General Rules
The debts underlying the bankruptcy will be paid by the trustee

91. Bankruptcy
Continue to satisfy the bankruptcy order until notified by the court to stop

92. General Rules
Bankruptcy orders issued under Chapter XIII of the Bankruptcy Act take priority over any other claim…

93. General Rules
…other than child support withholding orders...

94. General Rules
…and retirement loans

95. Additional Resources APA’s Guide to Federal and State Garnishment Laws
americanpayroll.org 95