Garnishment overview

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Our Support department is closed on Friday, April 28th for a company event. However, limited Accounting CS phone support is available on that date from 9 AM - 5 PM ET due to the approaching deadline for quarterly payroll tax forms.

Links to our most popular payroll tax processing topics are available in the Alerts and notices section on the right side of most pages.

Garnishment types supported by the application

Definitions

The portion of gross earnings remaining after the deductions required by law have been made. Examples of deductions required by law include taxes and also deductions required by state employees' retirement systems. Examples of deductions not required by law include deductions to buy savings bonds or stock in an employer's corporation, charitable donations, contributions to voluntary retirement programs, payments under a garnishment, or child support.

Note: Tip income is subject to wage withholding only when the employer has control of the money, such as when tips are charged to a credit card. In the case of cash tips, the employer generally doesn't have control of the tips, thus that money is not subject to wage withholding. In a garnishment situation, if tipped income is not to be considered in the calculation of garnishment disposable income, you will need to mark the Garnishment Disposable Income checkbox in the Exclusions section of the Main tab of the Setup > Payroll Items screen for that tipped wages payroll item.

All garnishments have limits that ensure that employees receive a certain amount of take-home pay.  Garnishments governed by the federal Consumer Credit Protection Act (CCPA), for example, protects consumers from unfair or harsh debt collection practices by limiting the garnishment to a maximum percentage of the employee's disposable income or to the amount by which the employee's disposable income exceeds 30 times the federal minimum wage. The limits vary by garnishment type.

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Order of priority for calculating garnishments

By default, the application processes garnishments for an employee in the following order, except in certain cases. You can change the default priority order of the four garnishment types that are marked with an asterisk (*) by entering an order date in the Order Date field of the Employee Payroll Item Settings dialog  for EVERY garnishment that is active for that employee.

  1. Child support*
  2. Federal levy*
  3. Chapter 13 bankruptcy*
  4. Creditor garnishment
  5. Defaulted student loan
  6. Other*

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Withholding limits

The federal Consumer Credit Protection Act (CCPA) protects consumers from unfair or harsh debt collection practices.  Title III of the CCPA, also known as the Federal Wage Garnishment Law, protects employees specifically by

The CCPA does not govern all wage garnishments. 

Governed by the CCPA Not governed by the CCPA
Child support Chapter 13 bankruptcy
Creditor garnishment Federal tax levy
Defaulted student loan Other
Other   

Click the following links to view the withholding limits for each of the garnishment types that are supported by the application.

Limits are not restricted by the Consumer Credit Protection Act (CCPA)

The maximum percentage of disposable income that can be garnished is 100%.

See also: Chapter 13 bankruptcy

Limits are restricted by the Consumer Credit Protection Act (CCPA)

  • If an individual is supporting a child or spouse in addition to the child or spouse named in a garnishment order, 50% of disposable earnings can be garnisheed. If amounts due are in arrears more than 12 weeks, 55% can be garnisheed.
  • If an individual is not supporting another spouse or dependent child, 60% of disposable earnings can be garnisheed. If amounts due are in arrears more than 12 weeks, 65% can be garnisheed.

Use the In Arrears checkbox and the This employee supports a second family checkbox in the Employee Payroll Item Settings dialog to specify if the default limits should be changed for those reasons.

See also: Child support

Limits are restricted by the Consumer Credit Protection Act (CCPA)

Creditor garnishments are calculated as the lesser of:

  • 25% of disposable income (after all taxes including state and local).
  • The amount by which disposable income exceeds 30 x (per week) or the federal minimum wage.

    Note: These limits do not apply to garnishments for bankruptcy, child support, or federal or state tax levies.

    See also: Creditor garnishments

Limits are restricted by the Consumer Credit Protection Act (CCPA)

Defaulted student loans are calculated as the lesser of:

  • 25% of disposable income (after all taxes including state and local).
  • The amount by which disposable income exceeds 30 x the federal minimum wage.

Note: The amount deducted for each defaulted student loan order is typically limited to 15% of disposable income; however, an employee can provide written consent to withhold more. The total limit, for an individual defaulted student loan case or multiple cases, is 25% of disposable income.

See also: Defaulted student loans

Limits are not restricted by the Consumer Credit Protection Act (CCPA)

  • The order of federal levies take a second priority after wage withholding for child support, if the child support order is received prior to the levy.
  • A levy on wages or salary is continuous from the time of the levy until the liability (taxes, interest, and penalties) is satisfied.
  • The amount exempt from levy is determined by adding the standard deduction to the number of personal exemptions and dividing that amount by the number of pay periods in the year for that employee (52 for employees paid weekly, 26 for employees paid bi-weekly, 24 for employees paid semi-monthly, etc.) Because the annual amount allowed for the standard deduction and personal exemptions generally change each year, so does the amount exempt from levy.
  • To simplify the calculation, the IRS publishes a table and makes it available in IRS Publication 1494, Table for Figuring Amount Exempt from Levy on Wages, Salary, or Other Income.

See also: Federal levies

Limits are not restricted by the Consumer Credit Protection Act (CCPA) by default.  This garnishment type is available so that firms can create any garnishment that the application does not support, such as state tax levy garnishments.

The application defaults to 25% as the maximum % of disposable income, but you can change this limit.

See also: Other garnishments

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Related topics

Chapter 13 bankruptcy

Child support

Creditor garnishments

Defaulted student loans

Federal levies

Other garnishments (a generic garnishment option).

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