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Best Practices!
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7. ©2020 The Payroll Advisor
7
The A to Z of Garnishments:
Part 3 Best Practices and
Getting the Math Right
9. 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
10. A Garnishment is Received in
Payroll
©2020 The Payroll Advisor
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
11. Is It Your Employee?
©2020 The Payroll Advisor
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
12. Is It Legal?
©2020 The Payroll Advisor
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
13. 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
©2019 The Payroll Advisor 13
14. Answer Back
©2020 The Payroll Advisor
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
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15. Example: California
©2020 The Payroll Advisor
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
16. Go Tell It To The Employee
©2020 The Payroll Advisor
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
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17. Payroll Form
©2020 The Payroll Advisor
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
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18. Sample Letter Creditor
Garnishment
©2020 The Payroll Advisor
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.
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19. 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.
©2019 The Payroll Advisor 19
20. Set It Up In Payroll
©2020 The Payroll Advisor
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
21. 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
©2019 The Payroll Advisor 21
22. 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?
©2020 The Payroll Advisor 22
23. Tracking System
©2020 The Payroll Advisor
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
24. 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
©2019 The Payroll Advisor 24
25. 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
©2019 The Payroll Advisor 25
26. 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
©2019 The Payroll Advisor 26
28. 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
©2019 The Payroll Advisor 28
31. ©2019 The Payroll Advisor 31
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
33. Tax Levy Would Calculate
©2019 The Payroll Advisor 33
Take Home Pay
($2,300 - $679.95)
$1620.05
Exempt from Levy $1284.61
Amount subject to levy
($1620.05 - $1284.61) $335.44
36. Creditor Garnishment
Calculation
©2019 The Payroll Advisor 36
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
38. But What if There’s a Child
Support Order?
©2020 The Payroll Advisor
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
39. Let’s Do One Where He Has the
Money
©2020 The Payroll Advisor
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
40. Then Do the Garnishment
Calculation
©2020 The Payroll Advisor
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
42. So If We Do the Calculation
©2020 The Payroll Advisor 42
43. Let’s add an arrearage to the
equation (state allows only 50%)…
©2020 The Payroll Advisor 43
44. Here’s how we fix it…
©2020 The Payroll Advisor 44
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
47. Percentages Made Easy
©2020 The Payroll Advisor 47
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!!!
50. 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.
©2020 The Payroll Advisor 50
51. Let’s try one with arrears
included…
©2020 The Payroll Advisor 51
52. We can take all the current
support but only partial on the
arrears…
©2020 The Payroll Advisor 52
53. We go back to the
percentages…
©2020 The Payroll Advisor 53
57. Organize. Humanize. Maximize.
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. Organize. Humanize. Maximize.
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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. Organize. Humanize. Maximize.
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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