Payroll Webinar: The A to Z of Garnishments Part 3

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RESCHEDULED The A to
Z of Garnishments Part 3

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Education
Garnishment
Best Practices!
Technology
Software to help you
manage complicated
garnishments!
You can focus on your
employee experience!
What you should expect from your HR
technology partner

Speaker
Housekeeping
4
Questions
Today’s
topic

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How to earn credit
Stay on the webinar,
online for the
full 60 minutes
Be watching using
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by email,
to registered email,
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following today’s session

Speaker
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Questions
Today’s
topic

©2020 The Payroll Advisor
7
The A to Z of Garnishments:
Part 3 Best Practices and
Getting the Math Right

Our Focus For Today
 Best practices for
communicating with
employees and issuing parties
for all types of garnishments
 Best practices for responding
to garnishments
 Best practices for processing
garnishments in the payroll
department
 Examples for calculating child
support when the employee
has one, two and more
Withholding Orders with and
without arrears
 Calculating the withholding for
a creditor garnishment
 Examples of how to calculate
the withholding and prioritize
the order of distribution when
an employee has more than
one type of garnishment
 Calculating the withholding
for a federal tax levy
 Calculating the withholding
for a creditor garnishment
 Examples of how to calculate
the withholding and prioritize
the order of distribution when
an employee has more than
one type of garnishment
©2020 The Payroll Advisor 9

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
10

Is It Your Employee?
 Does the employee currently
work for you?
 Does the name and Social
Security number match your
records?
 Doesn’t mean you can’t process
just need to clarify with issuing
party
11

Is It Legal?
 Need to determine if the
garnishment received is legal
 On the proper form?
 From the proper source?
 Completed correctly?
 Delivered properly?
 Allowed under law?
12

What Laws Do
I Follow?
 State law where
the employee is
located for most
items except IRS
tax levies
 Need source on
rules and
regulations for
states you are
located in
 Books, guides,
internet are
good sources

Answer Back
 Form may have response
included
 Time allowed is usually
limited
 Examples:
 Federal Tax Levy—send in
with first payment
 Creditor Garnishment:
Answer backs for Garnishee-
sometimes 20 days
 Child Support: same day
14

Example: California
 Must give a copy of the
withholding order and the
employee instructions
within 10 days after
receiving
 Must complete the
Employer’s Return and
send to levying officer
within 15 days
15

Go Tell It To The Employee
 Form may include employee
notification
 Example: Federal Tax Levy
 May be time limit
 Again Federal Tax Levy
 Should include form letter from
payroll
 Should be done regardless if
garnishment requires
16

Payroll Form
 Create templates for each type of
garnishment department handles
 Inform the employee as to:
 What you have received
 Payroll it will begin on
 Amount of deduction if known or IRS
chart for tax levies
 Contact information for deduction
questions
 Disclaimer on responsibility of
garnishment
17

Sample Letter Creditor
Garnishment
NOTE: This notice is not meant to
be construed as legal advice but as
a sample of the type of letter that
a payroll department may send. It
is recommended that payroll
departments get legal advice
before issuing notification letters.
18

Date:
To:
From: Payroll Department
RE: Creditor Garnishment
The attached creditor garnishment (or insert name of garnishment) has been
received by the payroll department. To comply with all federal and state
regulations concerning the withholding and remittance of creditor garnishments,
payroll will begin withholding on __________________ (insert payroll date). The
amount withheld will vary from pay day to pay day depending on the amount you
have earned on that individual payroll check. The amount deducted is based on the
Consumer Credit Protection Act garnishment chart we have enclosed.
If you have any questions regarding the processing of this garnishment within the
payroll department please contact ______________. However, please be aware
that the payroll department has no control over the amount of the withholding to be
deducted except to comply with legal federal and state limits under Title III of the
Consumer Credit Protection Act. If you have any disputes as to the amount of the
garnishment, the legality of the garnishment itself or any other legal matters please
contact the issuing court listed on the attached copy of the garnishment. The
payroll department cannot delay, suspend or in any way alter the garnishment.

Set It Up In Payroll
 Kept in separate files in payroll
 Each garnishment should have
separate file even if multiple
for one employee
 Tracking system separate from
payroll system for
reconciliations and questions
20

Setting It Up
 Always date stamp
the garnishment
 Discuss security
later
 Process on the
same day as
received – Do not
let sit in your in-box
 Determine pecking
order if employee
has more than one
garnishment
 Seek legal advice

Setting It Up
 Cross years, and even
systems over the life of
the garnishment
 For example child
support can last 18
to 20 years or more
 Federal tax levies 5-
7 years
 Line item on payroll
pay stub for child
support
 But blank line item for
other garnishments?

Tracking System
 Basically an excel spreadsheet
 One for each garnishment processed
 Use for life of garnishment
 Include amounts and dates of payments
 Current balance due if levy or creditor garnishment
 Track child support arrears
 Of course, reconciliation spreadsheet for all
garnishments processed matches payroll totals
23

Reconciling
 Make sure you
reconcile the G/L
account each
month
 Spread sheet you
created for tracking
comes in handy
now
 Reconcile
spreadsheet to
payroll before
releasing payments

Paying It Out
 Different types of
garnishments have
different due dates
 If you can do by
pay date to make
sure you comply
with all
garnishments and
state requirements
 Creditor may have
to hold until all
monies withheld or
time is up
 EFT may be
required

Security
 Confidentiality is a
must
 Anything that may be
a garnishment should
come to payroll first
 Only payroll has
access
 NO Human Resources
does not need to
know
 Watch out for
processing through
A/P

Security
 Never discuss
garnishments
over the phone
 Payroll personnel
need to be
secure as well

Security for
Payroll
Personnel
 A must in this day and
age
 Blind mailboxes for e-
mail
 Voice mail for phone
 Fake name for payroll
personnel handling
garnishments/lawsuits
 Physical security of
building or office
 Face to Face by
manager

Let’s Do Some Examples
29

Federal Tax
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:

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 Levy Would Calculate
Take Home Pay
($2,300 - $679.95)
$1620.05
Exempt from Levy $1284.61
Amount subject to levy
($1620.05 - $1284.61) $335.44

Creditor Garnishment
Calculation
Tony has a creditor
garnishment of $1,000 to
honor and has $700 in
disposable income and is
paid biweekly:

Calculation
First check the chart

Calculation
Step 2: Determine the lesser of disposable
income minus 30 times federal minimum wage
or 25% of disposable income:
Disposable income minus 30 times minimum
wage:
$700 - $217.50 = $482.50
25% of disposable income: 25% x $700 = $175

Creditor
Garnishment
Calculation
 $175.00 is the
lesser of these two
amounts.
 We can take the
$175 to satisfy the
garnishment

But What if There’s a Child
Support Order?
Tony's child support withholding obligation is
180.00/week. Deduct $180 for child support
from Tony's $700 pay
Difference between allowed amount for
garnishment and the child support deduction
taken: $175 - $180 = -$5
The child support deduction of $180 has
already exceeded the allowed amount for
garnishment; therefore nothing may be
withheld for Tony's creditor garnishment.
38

Let’s Do One Where He Has the
Money
 Tony's child support withholding obligation
is $140/week. His weekly disposable
income is $1,000. A creditor serves a
garnishment against Tony for a $1,000
debt.
 Deduct $140 for child support from Tony's
$1,000 pay
39

Then Do the Garnishment
Calculation
 Determine the lesser of:
 Disposable income minus 30 times minimum
wage:
$1000 - $217.50 = $782.50
 25% of disposable income: 25% x $1000 = $250
$250 is the lesser of these two amounts.
 Difference between allowed amount for
garnishment and the child support deduction
taken:
$250 - $140 = $110
 $110 can be withheld for Tony's creditor
garnishment
40

Child Support Calculation
Example
(State uses 50%)

So If We Do the Calculation

Let’s add an arrearage to the
equation (state allows only 50%)…

Here’s how we fix it…
Take the $200 CC/S and the $125 health
insurance premium but only $6 partial arrears
payment. That totals the maximum
deduction allowed of $331.00
You can take more if the state law allows for
arrearage percentage or has the higher
federal limits

Multiple Order Calculations

Same Disposable Income But…
46

Percentages Made Easy
To satisfy the orders you need to determine
the percentages for each order of the entire
amount owed. Then use those percentages
to determine how much of the allowable
deduction of $331.00 each order will get.
(watch out for states that still use the equal
split rule. That would then apply)
Finally… a use for algebra!!!

Here’s How It Is Done…
48

Let’s Apply the Percentages…

Don’t Forget to
Communicate!
Always remember to
send along a letter of
explanation when
forwarding less than
the order designated
amount. Include an
explanation of the
other support orders
and amounts in the
letter. Don’t forget to
explain why the
arrearages were not
taken as well.

Let’s try one with arrears
included…

We can take all the current
support but only partial on the
arrears…

We go back to the
percentages…

Calculate the Arrearages…

Forward the Following…

Final Questions

57
How Ascentis Payroll Can Help
Garnishment calculations, different state maximums, and multiple garnishment and child support scenarios
getting you down? Ascentis can help. Our payroll software can automate many of the complex withholding
calculations including:
• Multiple orders with different maximums by employee
• Different pro-ration methods by employee
• Vendor payments via check or EFT
• Automated or on-demand vendor payment processing
Get rid of those spreadsheets and harness the power of Ascentis today!

58
Learn More
If you are interested
in Ascentis Payroll, or our other HR technology like HR, Time, Talent,
Recruiting, please indicate your interest if you haven’t done so already with
the following poll.

59
How to earn credit
Stay on the webinar,
online for the
full 60 minutes
Be watching using
your unique URL
sent to you from
GoToWebcast
Program codes delivered
by email,
to registered email,
approximately 30 days
following today’s session

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www.ascentis.com

Payroll Webinar: The A to Z of Garnishments Part 3

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