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Garnishments BEYOND Child Support. Speaker. Rosemarie Fraumeni, CPP Manager, Payroll American Dental Partners, Inc. [email protected] Rosemarie Fraumeni, CPP. Certified Payroll Professional since 2000 BS in Accounting Involved in payroll since 1991 Member of APA’s

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Garnishments beyond child support

Garnishments BEYOND Child Support


Speaker
Speaker

Rosemarie Fraumeni, CPP

Manager, Payroll

American Dental Partners, Inc.

[email protected]


Rosemarie fraumeni cpp
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
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 deductions1
Involuntary deductions

  • Neither the employer nor employee have control


Employer s responsibilities
Employer’s responsibilities

  • Is the claim valid?

  • Inform the employee

  • Are there employee exemptions?

  • How will it affect employee’s pay?


Employer s responsibilities1
Employer’s responsibilities

  • Does it exceed any limits?

  • Will it affect other deductions?

  • Review with legal department


Deduction order
Deduction order

  • Child support

  • Bankruptcy

  • Federal administrative garnishment


Deduction order1
Deduction order

  • Federal tax levy

  • Student loan

    6. State tax levy


Deduction order2
Deduction order

  • Local tax levy

  • Creditor garnishment

    9. Voluntary deductions



Irs tax facts
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
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
Form 668-W, Part 1

  • For Employer


Form 668 w part 3
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
The federal tax levy

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


The federal tax levy1
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 levy2
The federal tax levy

  • Wage exemption


The federal tax levy3
The federal tax levy

  • Publication 1494


The federal tax levy4
The federal tax levy

Levy deductions lasting into successive years

2012

2013

2014

2015

2016


The federal tax levy5
The federal tax levy

  • Subtract these before determining take-home pay…

    • Taxes

    • Existing deductions

    • Some increases in existing deductions


The federal tax levy6
The federal tax levy

  • Post-levy deductions or increases to existing deductions lower the exempt amount


The federal tax levy7
The federal tax levy

  • Payments of any type are subject to levy


The federal tax levy8
The federal tax levy

  • When do we stop withholding?



50

600

3/11/12

242

X

5,000

Month


When employment ends
When employment ends

  • Complete the back side of 668-W, Part 3 and return it to the IRS


Voluntary agreement
Voluntary agreement

  • Employee may contact the IRS to negotiate a voluntary agreement


Voluntary agreement1
Voluntary agreement

  • Employee may file Form 2159



State tax levy1
State Tax Levy

CALIFORNIA – follows CCPA limits


State tax levy2
State Tax Levy

NEW YORK – 10% of gross earnings


State tax levy3
State Tax Levy

SOUTH CAROLINA – 25% of gross earnings


State tax levy4
State Tax Levy

IOWA – 100% of disposable earnings


State tax levy5
State Tax Levy

IDAHO – 100% of wages



Student Loan

  • 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 loan1
Student Loan

  • Penalties

    • Liable for any amount not withheld plus legal costs


Creditor garnishment

Creditor Garnishment


What is a creditor garnishment?

An employee has a debt that remains unpaid


What is a creditor garnishment?

A wage garnishment is a legal means by which the person who is owed the money can obtain payment


What is a creditor garnishment
What is a creditor garnishment?

“Wage attachment”

“Income execution”

“Writ”

“#@% !”


Disposable Earnings

Consumer Credit Protection Act (Title III)


Disposable Earnings

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
Disposable Earnings

  • Deductions required by law include withholding:

    • Mandated payments for state employee retirement systems


Garnishment Limits

  • 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


Garnishment Limits

State laws may still apply


Garnishment limits
Garnishment Limits

State law garnishment limits apply when they require a lesser amount to be garnished


Federal minimum wage
Federal Minimum Wage

$7.25 per hour









State rules6
StateRules


Multiple garnishments
Multiple Garnishments

Federal garnishment maximum applies no matter how many garnishments are received


Areas of state regulation
Areas of state regulation

The priority of multiple garnishments


Exceptions
Exceptions

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


Exceptions1
Exceptions

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


Areas of state regulation1
Areas of state regulation

Time limits for remitting withheld amounts


Areas of state regulation2
Areas of state regulation

Whether the employer can charge an administrative fee for processing the garnishment


Areas of state regulation3
Areas of state regulation

The procedure to follow when an out-of-state garnishment order is received


Discharge
Discharge

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



Bankruptcy1
Bankruptcy

  • Chapter 7

  • Liquidation of assets

  • Cancellation of debts

  • Start over


Bankruptcy2
Bankruptcy

  • Chapter 11

  • Business

  • Reorganization

  • Trustee pays creditors


Bankruptcy3
Bankruptcy

  • Chapter 13

  • Individuals

  • Reorganization

  • Trustee pays creditors


Bankruptcy4
Bankruptcy

Employee voluntarily declares bankruptcy


Bankruptcy5
Bankruptcy

  • Employee is found to be bankrupt by a court


Bankruptcy6
Bankruptcy

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


General rules
General Rules

Continuing to withhold and remit other orders could result in a creditor receiving double payments


General rules1
General Rules

Continue to withhold for other garnishments only if the trustee specifically provides instructions to do so


Bankruptcy7
Bankruptcy

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


Bankruptcy8
Bankruptcy

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


Bankruptcy9
Bankruptcy

The payment satisfies the employee’s creditors


General rules2
General Rules

The debts underlying the bankruptcy will be paid by the trustee


Bankruptcy10
Bankruptcy

Continue to satisfy the bankruptcy order until notified by the court to stop


General rules3
GeneralRules

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


General rules4
General Rules

…other than child support withholding orders...


General rules5
General Rules

…and retirement loans


Additional Resources

APA’s Guide to Federal and State Garnishment Laws

americanpayroll.org


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