garnishments beyond child support. speaker rosemarie fraumeni, cpp manager, payroll american dental...

Garnishments Garnishments BEYOND BEYOND

Child SupportChild Support

Speaker

Rosemarie Fraumeni, CPP

Manager, Payroll

American Dental Partners, Inc.

rfraumeni@comcast.net

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 Involuntary DeductionsDeductions

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 LevyFederal 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 Why are you getting a levy?levy?

A levy is the result of the delinquency of an employee to pay owed tax liabilities

Form 668-WForm 668-W

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

20162016

Levy deductions lasting into successive

years

The federal tax levy

20152015201420142013201320120122

The federal tax levy

Subtract these before determining take-home pay…• Taxes• Existing deductions• Some increases in existing deductions

The federal tax levy

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

600 3/11/12242

X5,000 Month

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 LevyState Tax Levy

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

Student Loan 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 Loan

Student Loan

Penalties• Liable for any amount not withheld plus legal costs

Creditor Creditor GarnishmentGarnishment

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?

What is a creditor garnishment?

“Wage attachment”

“Income execution”

“Writ”“#@% !”

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

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

Garnishment Limits

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

Garnishment Limits

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

Federal Minimum Wage

$7.25 per hour

Maximum Deduction

AMOUNT SUBJECT TO GARNISHMENT

Weekly

Disposable earnings are $217.50 or less: NONENONE

Disposable earnings are more than $217.50 but less than $290.00: AMOUNT ABOVE AMOUNT ABOVE $217.50$217.50

Disposable earnings are $290.00 or more: MAXIMUM 25%MAXIMUM 25%

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.

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.

State RulesST Disposable

earningsGarnishment 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.

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.

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.

No provision.

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.

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

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

BankruptcyBankruptcy

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

Bankruptcy

Employee voluntarily declares bankruptcy

Bankruptcy

Employee is found to be bankrupt by a court

Bankruptcy

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

General Rules

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

General Rules

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

Bankruptcy

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

Bankruptcy

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

Bankruptcy

The payment satisfies the employee’s creditors

General Rules

The debts underlying the bankruptcy will be paid by the trustee

Bankruptcy

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

General Rules

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

General Rules

…other than child support withholding orders...

General Rules

…and retirement loans

APA’s Guide to Federal and APA’s Guide to Federal and State Garnishment LawsState Garnishment Laws

americanpayroll.orgamericanpayroll.org

Additional ResourcesAdditional Resources

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