Garnishments%20BEYOND%20Child%20Support

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Garnishments BEYOND Child Support
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Speaker

• Rosemarie Fraumeni, CPP
• Manager, Payroll
• American Dental Partners, Inc.
• rfraumeni_at_comcast.net

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Rosemarie Fraumeni, CPP

• Certified Payroll Professional since 2000
• BS in Accounting
• Involved in payroll since 1991
• Member of APAs
• 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

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Agenda

• Involuntary deductions
• Federal tax levy
• State tax levy
• Student loan
• Creditor garnishment
• Bankruptcy

Please Complete Your Evaluation at the End of the
Workshop
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Involuntary Deductions
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Involuntary deductions

• Neither the employer nor employee have control

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Employers responsibilities

• Is the claim valid?
• Inform the employee
• Are there employee exemptions?
• How will it affect employees pay?

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Employers responsibilities

• Does it exceed any limits?
• Will it affect other deductions?
• Review with legal department

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Deduction order

• Child support
• Bankruptcy
• Federal administrative garnishment

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Deduction order

• Federal tax levy
• Student loan
• 6. State tax levy

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Deduction order

• Local tax levy
• Creditor garnishment
• 9. Voluntary deductions

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Federal Tax Levy
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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)
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Why are you getting a levy?

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

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Form 668-W
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Form 668-W, Part 1

• For Employer

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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.
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The federal tax levy

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

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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

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The federal tax levy

• Wage exemption

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The federal tax levy

• Publication 1494

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The federal tax levy

• Levy deductions lasting into successive years

2012
2013
2014
2015
2016
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The federal tax levy

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

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The federal tax levy

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

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The federal tax levy

• Payments of any type are subject to levy

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The federal tax levy

• When do we stop withholding?

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The federal tax levy

• Form 668-D

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50
600
3/11/12
242
X
5,000
Month
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When employment ends

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

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Voluntary agreement

• Employee may contact the IRS to negotiate a
  voluntary agreement

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Voluntary agreement

• Employee may file Form 2159

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State Tax Levy
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State Tax Levy

• CALIFORNIA follows CCPA limits

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State Tax Levy

• NEW YORK 10 of gross earnings

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State Tax Levy

• SOUTH CAROLINA 25 of gross earnings

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State Tax Levy

• IOWA 100 of disposable earnings

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State Tax Levy

• IDAHO 100 of wages

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Student Loan
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Student Loan

• Maximum deduction the lesser of
• 15 of disposable earnings, or
• 30 times the federal hourly minimum wage

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Student Loan

• Protection from discharge

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Student Loan

• Notice before garnishment
• 30 days before withholding begins

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Student Loan

• No guidance on priorities

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Student Loan

• Grace period after reemployment
• 12 months

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Student Loan

• Penalties
• Liable for any amount not withheld plus legal
  costs

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Creditor Garnishment
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What is a creditor garnishment?

• An employee has a debt that remains unpaid

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What is a creditor garnishment?

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

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What is a creditor garnishment?

• Wage attachment
• Income execution
• Writ
• _at_ !

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Disposable Earnings

• Consumer Credit Protection Act (Title III)

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Disposable Earnings

• Maximum amount of an employees disposable
  earnings

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Disposable Earnings

• Disposable earnings Gross earnings minus all
  deductions required by law

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Disposable Earnings

• Deductions required by law include withholding
• Federal, state, or local income tax

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Disposable Earnings

• Deductions required by law include withholding
• Mandated payments for state employee retirement
  systems

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Garnishment Limits

• Maximum amount of an employees disposable
  earnings is lesser of
• 25 of the employees disposable earnings for the
  week, or

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Garnishment Limits

• the amount by which the employees disposable
  earnings for the week exceeds 30 times the
  federal minimum wage

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Garnishment Limits

• State laws may still apply

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Garnishment Limits

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

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Federal Minimum Wage

• 7.25 per hour

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Maximum Deduction
AMOUNT SUBJECT TO GARNISHMENT
Weekly
Disposable earnings are 217.50 or less NONE
Disposable earnings are more than 217.50 but less than 290.00 AMOUNT ABOVE 217.50
Disposable earnings are 290.00 or more MAXIMUM 25

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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.
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State Rules
ST Disposable earnings Garnishment limits Administrative Fee
AZ That remaining portion of a debtors 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.
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State Rules
ST Disposable earnings Garnishment 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 individuals earnings alone support household. Student loans 5 per payment, deducted from other wages or salary owed to the borrower.
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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 debtors 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 employees earnings.
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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.
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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.
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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
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Multiple Garnishments

• Federal garnishment maximum applies no matter
  how many garnishments are received

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Areas of state regulation

• The priority of multiple garnishments

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Exceptions

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

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Exceptions

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

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Areas of state regulation

• Time limits for remitting withheld amounts

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Areas of state regulation

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

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Areas of state regulation

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

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Discharge

• Employers are prohibited by the CCPA from
  terminating an employee because of the employees
  one indebtedness

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Bankruptcy
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Bankruptcy

• Chapter 7
• Liquidation of assets
• Cancellation of debts
• Start over

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Bankruptcy

• Chapter 11
• Business
• Reorganization
• Trustee pays creditors

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Bankruptcy

• Chapter 13
• Individuals
• Reorganization
• Trustee pays creditors

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Bankruptcy
Employee voluntarily declares bankruptcy
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Bankruptcy
Employee is found to be bankrupt by a court
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Bankruptcy
Stop withholding on any other garnishment order
(except for child support)
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General Rules
Continuing to withhold and remit other orders
could result in a creditor receiving double
payments
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General Rules
Continue to withhold for other garnishments only
if the trustee specifically provides
instructions to do so
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Bankruptcy
An amount of the employees wages are withheld
and paid to the trustee
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Bankruptcy
The payment to the employees creditors is
handled by the bankruptcy trustee
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Bankruptcy
The payment satisfies the employees creditors
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General Rules
The debts underlying the bankruptcy will be paid
by the trustee
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Bankruptcy
Continue to satisfy the bankruptcy order until
notified by the court to stop
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General Rules
Bankruptcy orders issued under Chapter XIII of
the Bankruptcy Act take priority over any other
claim
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General Rules
other than child support withholding orders...
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General Rules
and retirement loans
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Additional Resources

• APAs Guide to Federal and
  State Garnishment Laws
• americanpayroll.org

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