GARNISHMENTS WHAT ARE THEY AND HOW DO SCHOOL DISTRICTS HANDLE THEM GARNISHMENT A proceeding whereby a plaintiff creditor, called the garnishor, seeks to subject to his or her claim the property of money of a third party, called the garnishee, owed by such party to the defendant debtor, sometimes called the principal debtor or the judgment debtor. 1
GARNISHMENT GARNISHEE: School District GARNISHOR: IRS, NM HSD Child Support Enforcement Division, NM Student Loans, etc. - THREE MAJOR TYPES OF GARNISHMENTS 1). Loans Student Loans, Payday Loans, Title Loans, Auto Loans, etc. usually comes as a Writ of Garnishment 2). Child Support Enforcement 3). Internal Revenue Service 2
WRIT OF GARNISHMENT An order from the court giving the employer notice that the employee owes money to the creditor and that the court will assist the creditor in collecting the debt. WHAT HAPPENS WHEN I RECEIVE A WRIT OF GARNISHMENT 1) You must file a written answer to the Court within 20 calendar days from the day you receive the writ. 2) You MAY be required to withhold a percentage of the employees salary. 3) ALWAYS READ THE WRIT IN ITS ENTIRETY 3
WHAT HAPPENS IF I DON T RESPOND? FAILURE TO ANSWER A GARNISHMENT WITHIN THE 20 DAY PERIOD MAY RENDER JUDGMENT BY DEFAULT AGAINST THE DISTRICT FOR THE FULL AMOUNT OF THE JUDGMENT RENDERED AGAINST THE EMPLOYEE, INCLUDING INTEREST COSTS!!!! (35-12-4 NMSA) THIS IS THE CASE EVEN IF YOU DON T RESPOND BECAUSE THEY ARE NO LONGER YOUR EMPLOYEE, OR NOT GARNISHABLE. PAYING AN EMPLOYEE AFTER RECEIVING WRIT After service of a garnishment on the District, it is unlawful for the District to pay to the employee, any debt or deliver to him any personal property attached by the garnishment (35-12-3C NMSA) The District should begin withholding from the employee s wages on their next paycheck and kept by the District until further order from the court Once the District receives a judgment order from the Court, the District must begin to pay the amount garnished to the garnishor. 4
WRIT OF GARNISHMENT If the judgment debtor is an employee, the District must pay the employee ONLY: 1)75% of the employee s disposable earnings for any pay period, OR 2)An amount each week of the pay period equal to forty times the FEDERAL minimum hourly wage rate, whichever is greater. 1) Bi-monthly 87 times the federal minimum hourly wage 2) Monthly 173 times the federal minimum hourly wage DISPOSABLE INCOME Gross pay Less: Federal Withholding State Withholding FICA Other deduction required by law: ERA RHC Total Disposable Income $1000.00 $ 100.00 $ 25.00 $ 76.50 $ 131.50 $ 20.00 $ 647.00 5
GARNISHMENTS ON NON-CONTRACT EMPLOYEES Garnishments can also be taken out of non-contract and substitute employees their rate is automatically 50% of disposable income because of their pay fluctuation. CHILD SUPPORT 1) Employment Verification or Insurance Verification requests information such as occupation, address, salary, work schedule, insurances offered, insurances purchased 2) Income Withholding for Support Order to withhold money from their check. 3) May order you to withhold a set amount per month or up to 65% of their disposable income 4) If you discharge, refuse to hire, or take disciplinary action against an employee or potential employee because of a child support order, you will be subject to a fine determined under State or Tribal law. 6
PRIORITY WITHHOLDING FOR SUPPORT HAS PRIORITY OVER ANY OTHER LEGAL PROCESS UNDER STATE LAW AGAINST THE SAME INCOME (USE 41 666(b)(7). IF A FEDERAL TAX LEVY IS IN EFFECT, PLEASE NOTIFY THE SENDER. 65% OF THEIR INCOME!!!! FEDERAL WITHHOLDING LIMITS 50% - IF THEY ARE SUPPORTING ANOTHER FAMILY 55% - IF THEY ARE SUPPORTING ANOTHER FAMILY AND THEY ARE IN ARREARS GREATER THAN 12 WEEKS 60% - IF THEY ARE NOT SUPPORTING ANOTHER FAMILY 65% - IF THEY ARE NOT SUPPORTING ANOTHER FAMILY AND THEY ARE IN ARREARS GREATER THAN 12 WEEKS FRONT PAGE OF THE IWO WILL HAVE A CHECKBOX INDICATING GREATER THAN 12 WEEKS 7
TRIBAL ORDERS You may not withhold more than the amounts allowed under the law of the issuing Tribe. For Tribal employers/income withholders who receive a State IWO, you may not withhold more than the lesser of the limit set by the law of jurisdiction in which the employer/income withholder is located or the maximum amount permitted under section 303(d) of the CCPA (15 U.S.C. 1673(b)). MULTIPLE CSO S If you receive more than one child support order, you will need to re-calculate the disposable earnings to ensure that you are not withholding more than 50% of their disposable earnings. You may have to set the total of both garnishments to be 50% of disposable wages. The amounts paid to each child support vendor would be prorated according to the dollar amounts ordered to be paid. 8
IRS NOTICE OF LEVY 1) Requires you, the employer, to send the employee a copy of the Levy detailing their options 2) Allow employee 3 days from the date you receive the Levy to answer. 3) ALWAYS SEND LEVY VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED. 4) If no response within 5 days, begin garnishing on the next paycheck. IRS NOTICE OF LEVY 1) READ THE ENTIRE NOTICE OF LEVY BEFORE COMPLETING ANYTHING!!!! 2) IRS LEVY S ARE NORMALLY 11-12 PAGES LONG WITH INFORMATION ON THE BACK OF EACH PAGE. 3) ALWAYS FOLLOW LEVY INSTRUCTIONS AND NOT WHAT YOU HAVE HEARD FROM ANYBODY ELSE UNLESS: 1) YOU HAVE INFORMATION IN WRITING FROM THE IRS 4) DO NOT PUT OFF RESPONDING TO A LEVY THE EMPLOYEE ONLY HAS 3 DAYS FROM THE DATE YOU RECEIVE THE LEVY TO RESPOND. 9
DISTRICT RESPONSIBILITIES 1) Send the employee a letter detailing their options. 1) Claiming exemptions 2) Other payment arrangements with the IRS 3) Garnishment, no exemptions 2) Include in your letter the ORIGINAL parts 2, 3, 4, and 5 of the Levy, making sure to keep a copy for yourself! 3) Once the 5 days has elapsed, send the employee another letter indicating that their paycheck will be garnished and how much the garnishment will be for. CLAIMING EXEMPTIONS 1) There is a statement of exemptions on part 3 of the Levy. 2) It allows the employee to claim Single; Married Filing a Joint Return; Married Filing a Separate Return; Head of Household; Qualifying Widow(er) 3) If the employee or their spouse is at least 65 and/or blind, they can claim the additional standard deduction. 4) List all personal exemptions that are claimed on their tax return. 10
OTHER PAYMENT ARRANGEMENTS WITH IRS 1) Best choice for the employee and the district. 2) Oftentimes the IRS will accept a lesser payment than the garnishment. GARNISHMENT, NO EXEMPTIONS 1) If the employee does not respond to the Levy, the district must begin withholding on the next paycheck. 2) No exemptions allowed. 11
DISTRICT REPLY TO LEVY 1) The reply to the Levy is located on the back of Part 3 of the Levy. 1) Check attached make sure to attach this reply to your first check and check the box that says additional checks will be sent. 2) Taxpayer no longer employed here 3) If the Levy has an incorrect address on it, please complete Section 4 Levy Processing Information 4) If the person listed on the Levy was never employed by you, complete the Remarks session. Keep in mind that at some point, the IRS has received a 1099 or W2 from you or they would not be sending you a Levy. IRS LEVY 1) Any payroll deductions that were in effect at the time the garnishment was received may remain in effect, however, new deductions will not be allowed while the garnishment is in effect, including child support or alimony payments. 1) The take home pay will determine how much their Levy amount will be: 1) Take home pay less exemptions 2) Direct Deposit is no bearing on take home pay (savings account deposits) 2) Do not stop an IRS Garnishment unless you receive a Release of Levy. 3) If the original debt has been satisfied, contact the IRS to get a Release of Levy. 12
IRS LEVY 1. If you owe the person listed on the Levy money other than wages at the time you receive the Levy, you must surrender those funds to the IRS. 2. The IRS supplies a Table for Figuring Amount Exempt from Levy on Wages, Salary, and Other Income. WHAT HAPPENS IF THE EMPLOYEE QUITS YOU MUST NOTIFY EACH AGENCY THAT THE EMPLOYEE HAS LEFT EMPLOYMENT WITH YOUR DISTRICT. MOST ORDERS WILL HAVE A SECTION THAT YOU CAN COMPLETE AND SEND IN. 13
WHAT HAPPENS IF THEY CHANGE JOBS OR GET A RAISE? YOU MUST RE-CALCULATE ALL GARNISHMENTS AT LEAST ANNUALLY TO CONSIDER CHANGES IN WAGES AND/OR WITHHOLDINGS. YOU MUST ALSO RE-CALCULATE GARNISHMENTS UPON CHANGES IN POSITION OR MID-YEAR INCREASES. WHEN CAN I STOP WITHHOLDING? YOU CANNOT STOP WITHHOLDING WAGES UNLESS YOU RECEIVE A COURT ORDER TO STOP THE GARNISHMENT. THE COURT ORDER WILL BE EFFECTIVE FOR THE NEXT PAY PERIOD. 14