Garnishments Overview. Audio for this session will play through your computer

Transcription

1 Garnishments Overview Audio for this session will play through your computer

2 Objective This session is designed to provide an overview of the different types of garnishments that can be assessed against an employee s wages and to explain some of the basic rules that apply to garnishments. 2

3 What Is a Lien? A lien is a legal claim of one person upon the property of another person to secure the payment of a debt or the satisfaction of an obligation. 3

4 What Is a Garnishment? A wage garnishment is a legal procedure in which a person s earnings are required by court order to be withheld by an employer for the payment of a debt, such as child support. 4

5 Types of Garnishments Child Support Medical Support Federal Tax Levy State Tax Levy 5

6 Types of Garnishments Bankruptcies Student Loans Creditor Garnishments Wage Assignments 6

7 7 Child Support

8 Child Support Terms Custodial Parent Parent who has custody of a child Non-Custodial Parent Parent who does not have custody and is subject to support Arrears Term used to describe past due child support Disposable Earnings Earnings after all statutory deductions 8

9 Child Support Financial support paid by a non-custodial parent to help support a child or children Can be voluntary or court ordered Overdue child support can be collected from tax refunds, liens on property, and sale of property 9

10 Child Support Maximum amount of disposable earnings subject to child support are generally: 50% if supporting another spouse or dependent child 60% if not supporting another spouse or dependent child Amounts are raised to 55% and 65% if the order is 12 weeks or more in arrears 10

11 11 Medical Support

12 Medical Support Orders Two Types A support order for the non-custodial parent to cover the dependent child on the employer s medical plan A support order where medical and/or dental insurance premiums are garnished from the non-custodial parent s wages 12

13 13 Federal Tax Levies

14 Federal Tax Levies A Federal Tax Levy is a wage attachment issued by the Internal Revenue Service These levies are generally issued after all other efforts to collect the unpaid taxes have failed IRS levies are communicated on a Notice of Levy on Wages, Salary, and Other Income (Form 668-W) 14

15 Federal Tax Levies Obligations by the employer include: Notify the employee Supply the employee with a copy of form; the employee will complete with exemptions and return to the employer Continue to withhold until form 668-D, Release of Levy, is received Tax levies must be satisfied before all other orders (with the exception of child support orders already in place) 15

16 Penalties on Federal Levies If an employer fails to comply with a federal tax levy, the employer becomes liable for the amount that was required to be withheld plus interest. 16

17 Take Home Pay IRS uses take-home pay when calculating deductions Take-home pay excludes: Federal, state, and local taxes Voluntary deductions in place at the time of the notice Involuntary increases in deductions such as annual increases in health care premiums 17

18 18 State Tax Levies

19 State Tax Levies State Tax Levy calculations differ from state to state Withholding can be calculated in several ways including: 100% of net earnings A set maximum percentage with no exempt amounts A set maximum percentage with exempt amounts Disposable income less exemptions determined by a table 19

20 20 Bankruptcies

21 Bankruptcies When an individual declares bankruptcy: All creditors are handled by the Bankruptcy Trustee Withholding on other garnishments should cease Chapter XIII orders take priority over any other claim except child support Bankruptcy orders can take up to 100% of an individual s net earnings 21

22 22 Student Loans

23 Student Loans Delinquent student loans are collected by the Federal Department of Education or designated Student Loan Guarantor Limit on student loan orders is 15% of disposable earnings Employee must take home at least 30 times the federal minimum wage per week 23

24 Student Loan Calculations Examples of Student Loan Deduction: Note: 30 times federal minimum wage of $7.25 = $ Example 1: Weekly Disposable Earnings $ Times 15% Net Amount Deduction will be for the entire $75.00 Example 2: Weekly Disposable Earnings $ Times 15% Net Amount Deduction will be for $32.50 because the employee must net at least per week. 24

25 Student Loans Student loan priority is equal to a creditor garnishment Student loan garnishments must be deducted, even in states that do not allow creditor garnishments Multiple student loan deductions cannot exceed 25% of disposable earnings For student loans, health insurance is excluded from disposable pay 25

26 26 Creditor Garnishments

27 Creditor Garnishments A creditor garnishment is assessed against an individual when a creditor sues an individual in court and is granted a judgment An individual has the opportunity to respond before a garnishment order is sent 27

28 Creditor Garnishments Some states do not allow creditor garnishments Some states allow only one creditor garnishment deduction at a time Employers are liable for amounts not withheld from the employee 28

29 Creditor Garnishments Maximum amount of a creditor garnishment cannot exceed: 25% of an employee s disposable earnings for the week The amount by which the employee s disposable earnings exceeds 30 times the federal minimum wage in a week Where state and federal laws differ, the most favorable to the employee must be used (smallest garnishment) 29

30 Creditor Garnishments The 25% of disposable earnings must also allow for higher priority items such as child support and federal tax levies 30

31 31 Wage Assignments

32 Wage Assignments Wage assignments are a voluntary agreement to withhold amounts Employers do not have to honor wage assignments State laws govern wage assignments, and some states prohibit them No limits apply 32

33 33 Administrative Fees

34 Administrative Fees State agencies may charge a fee for processing garnishments Per payment Per garnishment Employers may also be allowed to charge fees to cover administrative costs Fee regulations vary by state and garnishment type 34

35 Employer Responsibility Remember, employers can be held liable for entire garnishment amounts as well as litigation and research time if garnishments are not withheld correctly! 35

36 36 Thank You!