Payroll Webinar: The A to Z of Garnishments Part 2

A to Z of Garnishments:
Part 2: Tax Levies and
Creditor Garnishments
©2019 The Payroll Advisor 1
Presented onTuesday, November 5, 2019

Organize. Humanize. Maximize.
2

Speaker
Housekeeping
3
Questions
Today’s
topic

4
How to earn credit
Stay on the webinar,
online for the full 60
minutes
Be watching using your
unique URL
Program codes
delivered by email, to
registered email,
approximately 30 days
following today’s
session

Our Focus ForToday
 Terms, Definitions and Priorities
 Laws and Regulations
 FederalTax Levies
 Federal Agency Debt Collections
 Creditor Garnishments
 StateTax Levies
 Voluntary Wage Assignments
 Bankruptcies
 Student Loans

Usual Suspects
©2019 The Payroll Advisor
 Child Support
 FederalTax Levy
 Federal Agency Debt
Collection
 StateTax Levy*
 Creditor*
 Student Loans*
 Bankruptcies*
7
*Not really sure where they fit in until
received

Exceptions on Priority
 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
8

A Garnishment is Received in Payroll
 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
 The following steps should
be included
9

Terminating Employees
 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
10

FederalTax
Levies
The forms and
calculations

FederalTax Levies
 Form 668-W Notice of Levy on
Wages, Salary and Other
Income-New 4-18
 Amount of deduction based on
Publication 1494
 Chart lists amount exempt from
levy
 Deduct from “take home pay”
12

Form 668-W
 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
13

Form 668-W
 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 zero personal exemption
 Do not use FormW-4
 Use same chart even if year changes unless
employee submits new form
14

17
Part 3 goes
back to the
IRS…after
employee
completes
the
statement.
Send with
first
payment

18
Must complete filing status
Can’t claim self
Must do ALL Copies!

Answering Back
 Form 668-W has a required
response back from the
employer
 Remove before completing
 Send in with the first
payment
 Make copies for yourself
for when employee
terminates
19

What is Meant byTake Home Pay
 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
21

Determining Amount Exempt from Levy
 Publication 1494 is used
to determine the amount
exempt from levy
 Changes each year
(adjusted for inflation)
 Use the number of
dependents, pay period
and filing status the
employee submitted on
the Form 668-W
22
If you don’t receive a
completed Parts 3 and 4,
then use married filing
separate with no
dependents

FederalTax Levy Calculations
Our Example:
Employee Charlie receives
$2,300 every two weeks. A
tax levy of $15,000 is
received. Charlie claims
married filing jointly with 2
dependents. He has the
following deductions:
24

Deductions for Charlie
Deduction Amount
FIT $345.00
FICA $175.95
SIT $ 40.00
401(k) plan 3% $ 69.00
Health Ins. $ 50.00
Total $679.95

Tax LevyWould Calculate
Take Home Pay
($2,300 - $679.95)
$1620.05
Exempt from Levy $1261.54
Amount subject to levy
($1620.05 - $1261.54) $358.51

Paying the Levy
 Pay on the same day that
payments are made or are due
to employee or follow the levy
instructions
 Complete back of Part 3 of form
with first payment
 Make payable to “United States
Treasury”
 Put information on check not
stub
29

Stopping the Levy
 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!
30

32
Payroll usually uses this one

33
This will explain what they want you to do if
the entire levy is not released

Between Employees and the IRS
 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
34

Voluntary Deduction Agreement
 Form 2159 “Payroll
Deduction Agreement”
 Totally voluntary on both
sides
 Still need release form to
stop original levy
 Three-Part Form
35

Terminating Employees
 Must take out of
final paycheck
 Must notify IRS of
termination
 Use copy of
answer back
section
39

Federal Agency
Debt Collections
Rules and Regulations

Federal Agency Debt Collections
 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
42

 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
43

 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
44

StateTax Levies

StateTax Levies
 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 NC is up to 10% of an employees
wages.
 COULD come on a tax levy form or COULD
be a letter
46

StateTax Levies
 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
47

Creditor
Garnishments
CCPA limits and
regulations

More

Disposable Income
 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.
50

Item
Disposable
Income
Net Pay
Gross Pay $760.00 $760.00
Federal IncomeTax (95.00) (95.00)
Social Security (45.57) (45.57)
Medicare (10.66) (10.66)
State (36.75) (36.75)
Local (6.08) (6.08)
Cafeteria plan deduction—
Pretax
(25.00)
Union dues (10.00)
Savings bond (25.00)
Union pension (30.00)
Credit union car loan (50.00)
Total mandated deductions (194.06)
Total payroll deductions (334.06)
Totals $565.94 $425.94
©2018The PayrollAdvisor 51

Disposable Income and Net Pay
 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
52

MT
WY
ID
WA
OR
NV
UT
CA
AZ
ND
SD
NE
CO
NM
TX
OK
KS
AR
LA
MO
IA
MN
WI
IL IN
KY
TN
MS AL GA
FL
SC
NC
VA
WV
OH
MI
NY
PA
MD
DE
NJ
CT
RI
MA
ME
VT
NH
AK
HI
States following federal rules
State rules mirror federal
Creditor Garnishment Limits by State
25% disposable or amounts exceeding 50 times state/fed min
wage
25% of disposable or amounts in
excess of 40 times state/fed min
wage
53
25% disposable or amounts exceeding 35 times state/fed min
wage
Unique state rules
Follows federal rules with limits for head of household

StatesWith Unique State Rules
 AL: 25% of resident’s wages
 CA: 25% of disposable or 50% amount
exceed 40 times state or local minimum
wage
 DE: 15% of total wages
 IL: 15% of gross wages or amount over 45
times state min wage
 MA: 85% or amount of 50 times fed/state
min wage is exempt
 NC: Follows federal except orders from
public hospitals and public assistance are
limited
 NV:Weekly gross <$770 exempt amount
82% or 50 times fed min wage. >$770 75%
is exempt eff.10-1-17
 NY: uses local minimum wage
 PA: 10% for debts to landlords,
taxes to municipalities or HEAAA
debt
 SC: Garnishments not allowed for
consumer debts
 SD: lessor of 20% of weekly
disposable or amount over $346
less $25 for each depending living
with employee
 TX: Current wages exempt from
garnishment
 WI: 20% of disposable unless
household income below fed
poverty level then exempt
 WV: 20% of disposable or
amount over 50 times fed min
wage
54

MT
WY
ID
WA
OR
NV
UT
CA
AZ
ND
SD
NE
CO
NM
TX
OK
KS
AR
LA
MO
IA
MN
WI
IL IN
KY
TN
MS AL GA
FL
SC
NC
VA
WV
OH
MI
NY
PA
MD
DE
NJ
CT
RI
MA
ME
VT
NH
AK
HI
No provisions for fees
Permit fees
Creditor Garnishment Fees by State
Have unique fees for certain items
55

State Fees
 Collection of a fee for the employer is sometimes
permitted—states with no provisions to collect fees
include:
 AL, CO, CT, DE, HI, ID, KY, MD, MA, MS, MT, NE, SC,WV,WY
 Some states have special provisions for fees such as:
 AK: $5 for student loans only
 IA only permits witness fees
 NH only permits for collection of overpayment of SUI benefits
 NM: Employer answering summons entitled to actual costs/attorney’s fees
 NY: Employer entitled to advanced travel pay and 1 day’s witness fees
 NC permits only for debts to public hospitals or public assistance payments
 PA for collection of taxes only or creditor landlords
 TN permits for public employers only
56

State Fees
State Fees Permitted
Arizona $5 each pay period from nonexempt earnings
Arkansas $2.50 per pay period
California $1.00 for each payment
District of Columbia $2.00 for withholding order
Florida $5.00 for 1st deduction, $2.00 each deduction thereafter
Georgia $50 or 10% of amount paid into court (whichever is greater) but not to exceed $100 as reasonable attorney’s fees or expenses
Illinois 2% of amount to be deducted
Indiana Larger of $12 or 3% of total amount to be deducted ½ of fee from employee, ½ of fee from amount due creditor
Kansas $10 per pay period up to $20 per month, payable by creditor if can’t be taken from employee
Louisiana $3 from nonexempt income each payment garnishment is in effect
Maine $1 per check to be taken from amount withheld
Michigan $6 fee paid by plaintiff at the time a writ of garnishment is served. Amount is $35 for writs issued after 9-30-15
Minnesota $15 paid by creditor to employer at time of service of garnishment
Missouri One time fee not to exceed $20 withheld from wages in addition to garnishment
Nevada $5 paid by creditor to employer at time a writ of garnishment is served. Employer entitled to$3 per pay period not to exceed $12 per month
New Jersey 5% for compensation towards expenses and services in processing each payment
North Dakota $10 paid by creditor when employer is served with garnishment summons
Oklahoma $10 from employee’s funds for answering a garnishment summons
Ohio $3 per pay period payable by employee $1 for property garnishment payable by creditor
Oregon $2 processing fee for each week a payment is made unless withholding reduces below minimums. Must collect after last payment is made
Rhode Island $5 paid by employee for each writ of garnishment
South Dakota $15 for garnishee summons being served
Texas Lessor of actual costs or $10 from disposableearnings
Utah $10 for a single garnishment or $25 for continuing garnishment paid by creditor directly to employer
Vermont $10 for district court cases, $50 for superior court cases payable by creditor
Virginia $10 for each garnishment summons served
Washington $10 processing fee for 1st disbursement and $1 for each subsequent disbursement. $20 for first payment; if continuing lien $10 at time of second payment
Wisconsin $15 garnishee fee from creditor for each garnishment or extension

State Duration
Until Paid in Full 30
Days
60
Days
70 Days 90
Days
120
Days
179
Days
6 Mos 180 Days Until
Notified
AK; AL; AR; AZ; CA; CT;
DC; DE; FL; HI; IA; ID; IL;
IN; KY; LA; MA; MD; ME;
MI; MO; MS; MT; NJ; NM;
NV; NY; OH; OR; PA; RI;
TX; UT;
KS SD
WA
MN NE
OR
WI
WY
MT; NV GA CO CO
GA (179)
OK
MI (182)
TN
VA
NV (10-1)
MI
• California: the earlier of paid in full or date of termination as established by the court
• Iowa: or until annual limit is reached
• Michigan, Montana, Nevada, Oklahoma, Oregon, Tennessee: either paid in full or time limit whichever comes first
• North Carolina: public hospital remains for up to 60 months
• North Dakota: 270 days for continuing garnishments
• New Hampshire: 1 pay period
• South Carolina and Vermont: does not address issue
• West Virginia: one year

MT
WY
ID
WA
OR
NV
UT
CA
AZ
ND
SD
NE
CO
NM
TX
OK
KS
AR
LA
MO
IA
MN
WI
IL IN
KY
TN
MS AL GA
FL
SC
NC
VA
WV
OH
MI
NY
PA
MD
DE
NJ
CT
RI
MA
ME
VT
NH
AK
HI
Immediately
Within 2 to 7 days
Creditor Garnishment Employer ResponseTime
Within 2 weeks (8-14 days)
59
Within 15-21 days
30 days or more
Varies, per pay period or does not address issue

State Fees
 May also be a fee to
collect for the state
or court or plaintiff in
the case
 Read the garnishment
60

Voluntary Wage
Assignments
Also known as payday
loans

Voluntary Wage Assignment
 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”
62

For Example—South Carolina
SC: A creditor cannot take an assignment for the
payment of or as security for a debt arising from a
consumer credit transaction. Such an assignment
is unenforceable by the creditor and revocable by
the employee.An employee can authorize
voluntary deductions for consumer credit
transactions [S.C. Code Ann. § 37-2-410 ].
Voluntary Authorizations. Employees may
authorize deductions from wages if the
authorization is revocable [S.C. Code Ann. § 37-2-
410 ].

For Example—Colorado
 Maximum subject to assignment. The maximum amount subject to assignment is a fixed and
definite part of wages earned or to be earned within 30 days from the date of the assignment
[Colo. Rev. Stat. § 8-9-101 ].
 Conditions. An employer cannot recognize or honor any wage assignment unless it is in writing.
Assignments are valid and enforceable if a copy is given or sent by registered mail to the
employer within five days after execution and the wage earner receives a copy [Colo. Rev. Stat.
§ 8-9-101 ; Colo. Rev. Stat. § 8-9-102 ].
 Assignment of future wages. An assignment of future wages is valid if the wage earner has
actual notice when the assignment is made, or if the assignment is recorded with the county
recorder within five days of being made. If the wage earner is married, the wage assignment
must be signed by the individual's spouse and notarized [Colo. Rev. Stat. § 8-9-103 ; Colo. Rev.
Stat. § 8-9-104 ].
 Consumer credit transactions. Assignments arising out of consumer credit sales or leases are
revocable by the buyer or lessee and unenforceable by the seller or lessor. Assignments for
payment of or as security for a consumer loan (except assignments of commissions or accounts
receivable) are revocable by the debtor and unenforceable by the lender [Colo. Rev. Stat. § 5-2-
410 ; Colo. Rev. Stat. § 5-3-403 ].

For Example—Illinois
Conditions. A wage assignment is valid if:
 it is in a separate written document, signed by the employee showing the date of signature, the
employee's Social Security number, the employer's name, the price of the articles sold or the amount
loaned, the interest rate or the time-price differential, and the payment dates;
 it is given to secure an existing debt or a debt contracted at the same time as the assignment;
 the employee gets a copy when it is executed; and
 the words "Wage Assignment" are at the top and one inch above or below the employee's signature,
in bold face type at least one-quarter-inch high [ILCSChapter 740 § 170/1 ].
 The following conditions apply:
 1 a demand for a wage assignment collection can be served on an employer if a debtor defaults for more than 40 days;
 2 the demand states the amount in default;
 3 an original of the assignment is provided to the employer (prior to Jan. 1, 2017, a photostat of the wage assignment was also
acceptable);
 4 a notice of intent was sent to the employee; and
 5 an advice copy was sent to the employer by first class, registered or certified mail at least 20 days before the demand was
served on the employer [ILCS Chapter 740 § 170/2 ].

For Example—Illinois
 Revocation of wage assignment. Effective Jan. 1, 2017, a wage assignment may be revoked if the wage assignment is
revocable under federal law and the employee submits the Illinois Revocation Notice Form (see ILCS Chapter 740
§ 170/2.2 ), or provides written notice of the revocation, to the creditor. Failure to use the sample language provided in
the notice described in ILCS Chapter 740 § 170/2.2 does not affect the validity of the written notice of revocation.The
employee may submit a copy of the notice to his or her employer.After a revocation notice is received by the
employer, no wages are subject to the demand unless the employer receives a copy of a subsequent agreement
between the employee and the creditor authorizing payment. If an employee has not provided a Revocation Notice
Form or otherwise served the creditor with a written notice of revocation (if the wage assignment is revocable under
federal law) within 20 days after receiving the notice of intention to make a demand, the creditor may proceed with
his demand, and the employer may commence payment to the creditor no sooner than 5 business days after service
of such demand, if no revocation notice has been received by the employer [ILCS Chapter 740 § 170/4.1 ; ILCS Chapter
740 § 170/4.2 ].
 Prior to Jan. 1, 2017, an employee had 20 days after receipt of the notice of intent or five days after service of the
demand to give a defense notice to the employer.After the defense notice was given to the employer no wages were
subject to the demand unless the employer received a copy of a subsequent agreement between the employee and
creditor authorizing payment [ILCS Chapter 740 § 170/4.1 ; ILCS Chapter 740 § 170/4.2 ].
 Wages paid by a state or local government or by a school district are not subject to wage assignments [ILCS Chapter
740 § 170/10 ].
 Assignment of future wages An assignment is valid for three years from the date of execution against the present
employer, and for two years against a future employer.A demand applies to wages due when the demand is served,
and to future wages until either the balance due under the assignment is paid or the end of the last payroll period
ending within 84 days after the demand is served [ILCS Chapter 740 § 170/2 ; ILCS Chapter 740 § 170/3 ; ILCS Chapter
740 § 170/5 ].
 Priority. Wage assignments are to be implemented on a first-come-first-served basis [ILCS Chapter 735 § 5/12-803 ].
 Employer fee. An employer is entitled to a collect and retain a fee of $12 for each wage assignment, to be credited
against the wage-earner's outstanding debt [ILCSChapter 740 § 170/4 ].
66

For Example—Indiana
Any person or firm lending money to an employee, except an employer,
on the security of or in consideration of an assignment of wages is a
wage broker. An assignment to a wage broker or other person is valid, if:
(1) it is dated as of its execution; (2) when made by a married person, the
spouse signs and acknowledges the signature; and (3) written notice and
a copy of the assignment are given to the employer or the debtor within
10 days of execution [Ind. Code § 22-2-7-1 to Ind. Code § 22-2-7-5 ].
Consumer credit transactions. Wage assignments arising out of
consumer credit sales, leases, or loans are unenforceable.An employee
can authorize deductions if the authorization is revocable [Ind. Code
§ 24-4.5-2-410 ].

Bankruptcies
How to handle in the
payroll department

Bankruptcy
 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
69

Student Loans
Regulations and Priorities

Student Loans
 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
71

Student Loans
Under federal regulations, only
those agencies having an
agreement with the U.S.
Department of Education are
allowed to issue wage
withholding orders for defaulted
student loans made under the
federal loan guaranty program.
Agencies having such an
agreement are referred to as
state guaranty agencies or loan
servicers.
72

Disposable Pay Is Defined As…
 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.
73

ButThey Do Not Include…
 Voluntary pension deduction or retirement
plan contributions or union dues.
 AWage Garnishment Worksheet is included
with theWage Garnishment Order to assist
payroll in calculating disposable pay and the
wage garnishment amount.
 Also website
http://fmsq.treas.gov/debt/AWG_calc.html
74

Handling a Student Loan Garnishment
 ED first notifies the employer that debtor pay must
be withheld by sending aWage Garnishment Order
(SF-329B) 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—usually within 10 days
 Remit within 3 days after withholding
76

ButWhat if the Employee is Gone?
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-
562-6013.
81

X
Complete here

Then Each Quarter…
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.
83

Questions

85
Questions?

86
How Ascentis Payroll Can Help
Ascentis can handle garnishment calculations for you automatically.
• Federal and State Tax Levies
• Voluntary Deduction Agreements or Wage Assignments
• Federal Agency Debt Collections
• Creditor Garnishments
• Student Loans
• Or any kind of garnishment order
.

87
Learn More
Request a health-check of your organization’s benefits/payroll systems today!

88
How to earn credit
Stay on the webinar,
online for the full 60
minutes
Be watching using your
unique URL
Program codes
delivered by email, to
registered email,
approximately 30 days
following today’s
session

89
Share with your colleagues

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Contact Us
info@ascentis.com
www.ascentis.com

Payroll Webinar: The A to Z of Garnishments Part 2

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