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Transcript of Garnishments BEYOND Child Support. Speaker Rosemarie Fraumeni, CPP Manager, Payroll American Dental...
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Garnishments Garnishments BEYOND BEYOND
Child SupportChild Support
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Speaker
Rosemarie Fraumeni, CPP
Manager, Payroll
American Dental Partners, Inc.
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Rosemarie Fraumeni, CPP
• Certified Payroll Professional since 2000• BS in Accounting• Involved in payroll since 1991
• Member of APA’s • 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 Involuntary DeductionsDeductions
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Involuntary deductions
Neither the employer nor employee have control
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Employer’s responsibilities
Is the claim valid?
Inform the employee
Are there employee exemptions?
How will it affect employee’s pay?
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Employer’s responsibilities
Does it exceed any limits?
Will it affect other deductions?
Review with legal department
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Deduction order
1. Child support
2. Bankruptcy
3. Federal administrative garnishment
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Deduction order
4. Federal tax levy
5. Student loan
6. State tax levy
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Deduction order
7. Local tax levy
8. Creditor garnishment
9. Voluntary deductions
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Federal Tax LevyFederal 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 Why are you getting a levy?levy?
A levy is the result of the delinquency of an employee to pay owed tax liabilities
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Form 668-WForm 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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20162016
Levy deductions lasting into successive
years
The federal tax levy
20152015201420142013201320120122
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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 3/11/12242
X5,000 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 LevyState 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 Student Loan
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Maximum deduction the lesser of:• 15% of disposable earnings, or• 30 times the federal hourly minimum wage
Student Loan
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Protection from discharge
Student Loan
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Notice before garnishment• 30 days before withholding begins
Student Loan
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No guidance on priorities
Student Loan
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Grace period after reemployment• 12 months
Student Loan
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Student Loan
Penalties• Liable for any amount not withheld plus legal costs
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Creditor Creditor GarnishmentGarnishment
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What is a creditor garnishment?
An employee has a debt that remains unpaid
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A wage garnishment is a legal means by which the person who is owed the money can obtain payment
What is a creditor garnishment?
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What is a creditor garnishment?
“Wage attachment”
“Income execution”
“Writ”“#@% !”
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Consumer Credit Protection Act (Title III)
Disposable Earnings
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Maximum amount of an employee’s “disposable earnings”
Disposable Earnings
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Disposable earnings = Gross earnings minus all deductions required by law
Disposable Earnings
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Deductions required by law include withholding: • Federal, state, or local income tax
Disposable Earnings
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Disposable Earnings
Deductions required by law include withholding: • Mandated payments for state employee retirement systems
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Maximum amount of an employee’s “disposable earnings” is lesser of:• 25% of the employee’s disposable earnings for the week, or…
Garnishment Limits
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Garnishment Limits
• …the amount by which the employee’s disposable earnings for the week exceeds 30 times the federal minimum wage
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State laws may still apply
Garnishment Limits
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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: NONENONE
Disposable earnings are more than $217.50 but less than $290.00: AMOUNT ABOVE AMOUNT ABOVE $217.50$217.50
Disposable earnings are $290.00 or more: MAXIMUM 25%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 debtor’s 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 RulesST Disposable
earningsGarnishment 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 individual’s 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 debtor’s 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 employee’s 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 employee’s one indebtedness
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BankruptcyBankruptcy
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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 employee’s wages are withheld and paid to the trustee
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Bankruptcy
The payment to the employee’s creditors is handled by the “bankruptcy trustee”
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Bankruptcy
The payment satisfies the employee’s 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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APA’s Guide to Federal and APA’s Guide to Federal and State Garnishment LawsState Garnishment Laws
americanpayroll.orgamericanpayroll.org
Additional ResourcesAdditional Resources
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